Skip to main content
Inland Revenue

Tax Policy

Announcements
PUBLISHED 20 March 2006

Shortfall penalty legislation tabled

Legislation tabled in Parliament today gives Inland Revenue greater flexibility in imposing shortfall penalties for taking an unacceptable tax position. The change is expected to be incorporated into the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Bill, which awaits its third reading. For more information see the media statement from the Minister of Revenue and Supplementary Order Paper no. 19.


Hon Peter Dunne
Minister of Revenue

MEDIA STATEMENT

Tax shortfall penalty change

Revenue Minister Peter Dunne has introduced legislation to give Inland Revenue greater flexibility in imposing shortfall penalties for taking an unacceptable tax position.

"A supplementary order paper tabled in Parliament today will allow Inland Revenue to exercise discretion in cases resulting from a simple mistake or oversight on the part of a taxpayer," Mr Dunne said.

"It has been brought to the government's attention that penalties for having an unacceptable tax position are being applied to a wider range of tax shortfalls than was envisaged by Parliament when it passed the legislation, in 1996.

"The penalty was aimed at ensuring that taxpayers take extra care, when declaring their income for tax purposes, in cases where there was potential for very large shortfalls.

"The penalty should not generally apply to those who have made a clear mistake or simple oversight and then attempt to rectify it. These people, however, are attracting the penalty in some cases.

"The penalty for taking an unacceptable tax position is 20% of the shortfall, so its imposition is a serious matter.

"The change has been added to the taxation bill currently before Parliament and, once enacted, will apply from 1 April 2003.

"The legislative change introduced today is, I hope, a short-term measure to reduce the harshness of the penalty in some cases. In the longer term I would like to devise legislative solutions that address a whole range of concerns about the tax penalty rules. Any resulting changes will, of course, be subject to the usual consultative process," Mr Dunne said.

The text of the supplementary order paper is available at www.taxpolicy.ird.govt.nz

Contact: Ainslie Fenwick, revenue policy advisor, 04 471 9728

[email protected]