Companies are being encouraged to organise their financial records and prepare for detailed enquiries as the tax authorities strengthen their compliance efforts.
According to business consultancy EY, this year’s government budget includes an increase of approximately $64 million in funding for the Inland Revenue to intensify collection efforts and promote tax compliance.
For EY tax leader Dean Madsen, the additional funding will probably lead to more thorough examinations of taxpayers in New Zealand aside from verifying the accuracy of tax returns.
He said IRD might want to get a deeper understanding of how reported figures are derived. He emphasised the importance of technology, data management, and corporate governance systems to display integrity in tax practices.
“The changes could be seen as a warning for New Zealand businesses, who need to be ensuring their tax practices are fully compliant to avoid both the financial implications and the reputational risk of noncompliance,” Madsen said.
“Businesses should be making certain their tax structuring is adhering to IRD’s expectations, auditing previous years, and consistently seeking advice.”
“Because, with increased scrutiny from the IRD, businesses can’t afford not to.”
The department is expected to generate an estimated $8 in revenue for every dollar spent on enforcement, emphasising its strong mandate to pursue noncompliance aggressively.
Recent compliance efforts have already uncovered undeclared taxes, including over $150 million from the property sector and $45 million in the horticulture industry, where issues like under-the-table payments and incorrect tax deductions have been identified.