Miscellaneous

Issue: Removing tax agent status should not be a disputable decision

Submission

(Matter raised by officials)

The decision to remove a tax agent from the list of tax agents or not to list a person as a tax agent should not be a disputable decision.

Comment

Following an amendment in the Taxation (Business Taxation and Remedial Matters) Act 2007, Inland Revenue must keep a list of tax agents. Inland Revenue has the ability to remove a person from the list or not list a person, if it is concerned that continuing to list the person as a tax agent would adversely affect the integrity of the tax system.

Operational guidelines set out the circumstances in which the discretion might be exercised. Before making a decision not to list or remove a person from the list, Inland Revenue is required to give a tax agent notice of the intention to revoke the agent’s status and give reasons for the intended revocation. The agent will be given a 30-day period (or a shorter period if Inland Revenue is concerned that there is a substantial risk to the revenue and a longer period if such a period is appropriate in the circumstances) in which to resolve the matters raised in the notice of intended revocation.

Because sufficient time is allowed for the affected agent to comment and for those comments to be taken into account, officials consider that the decision of the Commissioner should not be a disputable decision. Tax agents will still be able to judicially review Inland Revenue’s decision.

Recommendation

That the submission be accepted.

Issue: No new due date for default assessments

Submission

(Matter raised by officials)

The requirement to set a new due date should be amended so that it does not apply when the Commissioner makes a default assessment.

Comment

The Taxation (Business Taxation and Remedial Matters) Act 2007 amended section 142A to allow a new due date to be set by the Commissioner, regardless of whether a return has been filed. The amendment ensures that both late payment penalties and shortfall penalties are not imposed if the taxpayer has not filed a return. For example, before the amendment to section 142A, if a return had not been filed and some time later Inland Revenue determined that there was income and a return was necessary, late payment penalties would apply from the original due date for payment with a possible shortfall penalty also imposed.

As currently drafted, the amendment also applies if the Commissioner makes a default assessment. A default assessment is an estimation of tax liability and remains in place until the taxpayer files a return. A default assessment is likely to present a slightly larger debt than a self-assessment, and thereby encourage taxpayers to file returns.

Given that a default assessment is made when there is a concern about non-compliance and a taxpayer has not filed a return, and that the assessment is reversed when the return is filed, officials consider it appropriate that a new due date is not set when a default assessment is made. When the return is filed, a new due date will be set.

Recommendation

That the submission be accepted.