Tax and privilege changes proposed

A government discussion document released today proposes a new code for tax and privilege to replace the current legal privilege in tax matters. Under the new system, tax advice given by chartered accountants would be privileged on the same basis as that given by lawyers. The new privilege would apply only to opinion on tax law, not to facts. The current privilege in relation to tax litigation would not be affected. For more information, see the government's media statement and the discussion document, "Tax and privilege: a proposed new structure".

Hon Dr Michael Cullen
Minister of Revenue

MEDIA STATEMENT

Changes for legal privilege in tax matters

The government is considering extending to chartered accountants the legal privilege protecting tax advice given by lawyers to their clients against disclosure to Inland Revenue.

The proposal is set out in a discussion document released today by Revenue Minister Michael Cullen and is part of a broader review of the whole privilege system.

Also under consideration is a new definition of privilege which will be more limited than the existing one in that it will apply only to opinion on tax law, not to facts.

"The current privilege rule prevents some factual information communicated between lawyers and their clients from being released to Inland Revenue. This creates widely recognised difficulties in the administration of the tax system. These problems were highlighted by the Wine-box Inquiry, the Committee of Experts on Tax Compliance, and the Law Commission," Dr Cullen said.

"The change will help to promote a greater sense of fairness amongst taxpayers if they see that others cannot use privilege to conceal the details of their income."

The current privilege relating to tax litigation will not be affected by the proposed changes.

The discussion document, "Tax and privilege: a proposed new structure", is published on the website of the Policy Advice Division of Inland Revenue at www.taxpolicy.ird.govt.nz. Submissions on the proposals close on 31 July.

Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013. E-mail: [email protected]. Technical inquiries to Michelle Davie [tax advisor in Dr Cullen's office] 04-471-9728.