New Zealand Law Society - Inland Revenue transitional powers to override tax legislation not justified

Inland Revenue transitional powers to override tax legislation not justified

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Giving Inland Revenue the ability to override the Tax Administration Act while it beds in its Business Transformation programme would give officials exceptionally wide powers and is not justified, the New Zealand Law Society says.

"The Tax Administration Act covers a wide range of tax administration processes and rules that are fundamental to New Zealand's revenue collection, and to taxpayers' perception of the integrity of the tax system. Laws, including tax laws, should not be able to be changed by regulation, even if temporarily," Neil Russ, convenor of the Law Society's Tax Law Committee, has told parliament's Finance and Expenditure select committee.

The committee was hearing the Law Society submission on the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill: Supplementary Order Paper 190.

The proposed powers are said to be needed to "resolve any potential transitional issues" that might arise as Inland Revenue transitions between software platforms as part of its Business Transformation process. The proposal would give Inland Revenue wide powers, including the ability to amend, suspend or override provisions in the Tax Administration Act, during the transition.

The Law Society questions whether these circumstances are sufficiently exceptional to justify the use of transitional override powers. It agrees with the criticism by Treasury officials that the regulatory analysis is not complete or convincing enough to allow an informed decision to be made on the appropriate scope of the powers.

The Law Society recommends that more thought is given to the specifics of the transition and the type of override powers likely to be needed.

"Regulations to override legislation should be drafted in the most specific and limited terms possible," Mr Russ says.

"If Parliament considers it necessary to give such powers, they should be used extremely sparingly, bearing in mind the obligations on the Minister and officials to maintain the integrity of the tax system, including taxpayer perceptions of the integrity of the system."

If the proposed powers are to be given, the Law Society says they should not be used to:

  • impose or increase liability for tax, use of money interest or penalties;
  • alter taxpayers' rights to dispute or to challenge a tax liability or decision of the Commissioner of Inland Revenue, or the application of the statutory time bar;
  • alter Part 2 of the Act (which contains the care and management provisions), or any of the provisions relating to the Commissioner's information gathering rights, privilege and non-disclosure, or Parts 4 (Secrecy), 5 (Determinations) and 5A (Binding Rulings).