“do we really believe the Commissioner isn’t doing this on purpose”
I am sure we are all pleased about the automation of many tax matters. A number of boring aspects of a tax agent’s job have disappeared. Many tasks of yesteryear added little value for clients.
However since the advent of IRD’s new $1.7 billion computer system “START”, IRD has been promulgating a myth that tax is automatic and that instead of engaging an agent or tax expert, taxpayers are better to deal directly with IRD.
Where income is all from paye or NZ interest and dividends, tax can be automated. Those taxpayers don’t have and don’t need a tax agent or other expert. However other taxpayers’ affairs are more complex and they do need expert assistance. Suggesting everything is automatic is disingenuous and naïve.
The new START system has led to a wave of IRD correspondence sent directly to the clients of tax agents. That correspondence frequently duplicates and often undermines the relationship between taxpayers and their elected representative, and all too often is factually wrong..
I have listed some recent examples at the end of this article.
The general theme is that:
- IRD seems to find any excuse to communicate directly to taxpayers,
- Some communications seem to have legitimate intent but IRD gets the detail wrong
- The outcome is that IRD is pretending that tax is automatic but doesn’t distinguish between taxpayers with complex affairs and those that are simple, and between those with and those without agents
Its time IRD started thinking about what messages they are trying to impart.
People with complex affairs who try to manage their own tax frequently stuff them up and fixing up errors is inevitably more difficult than getting them right in the first place.
I don’t think tax agents are going to run out of work, but IRD is making our jobs a lot harder than they need to be, and ironically making IRD’s job harder as well
I have raised these issues with the Commissioner and senior staff and even the Minister of Revenue, and sometimes IRD makes belated corrections. However it is like playing whack a mole- IRD keeps finding new ways to engage directly with clients of tax agents.
IRD continually asks for examples but when we provide them IRD claims they are only isolated examples.
IRD claims that there have been some teething problems with the START system but after 2 ½ years that excuse is wearing thin. After so many examples it is hard to conclude anything else but that IRD is doing this deliberately.
So I call on the Commissioner to make a public statement reinstating IRD’s respect for the relationship between the tax agent and their clients. Let that be a leadership principle that the IRD can be guided by.
I also call on the respective professional bodies representing tax agents (CAANZ, CPA and ATAINZ) to directly challenge IRD on their approach and until IRD can sort themselves out, to stop contacting our clients. If IRD can’t distinguish between those with and without agents then they need to stop their communications altogether.
IRD issues automatic tax calculations and issues refunds based on source deduction income that fail to take into account other sources of income yet to be declared. IRD has the audacity to describe these calculations as being based on a submitted return.
IRD regularly writes to taxpayers and their investment providers and tells them they should select a lower withholding tax rate. This includes non resident taxpayers who are legally required to have tax deducted at 28%.
IRD writes to superannuitants and tells them that their national super is their main source of income and should have tax deducted at 17.5% rather than the 33% recommended by their tax advisor. IRD ignores the fact that many superannuitants also derive other significant income that is not taxed at source and we elect to have more tax deducted from national super to avoid having to go into the provisional tax regime.
From time to time IRD writes directly to taxpayers saying that their Accounting Information Method [AIM] is a “better” way of managing their provisional tax – read “better than using the uplift method or tax pooling recommended by their agent”. Among other things AIM requires financial statements every two months. So far less than 3000 taxpayers have taken up AIM. Tax agents are well aware of the regime and will recommend if appropriate. IRD is marketing to people for whom it won’t be appropriate. Ready fire aim IRD.
When a taxpayer engages a tax agent, IRD immediately notifies the taxpayer and encourages them to register for MyIR and manage their own tax obligations. After I lodged a formal complaint IRD has belatedly agreed to add the words ‘only if you don’t have an agent”. Such a letter will be self conflicting – you have a new agent, and if you don’t have an agent then manage your own obligations.
In July 2020 IRD issued 100,000 text messages that said “Hi, IRD here. We’re making tax automatic but we need your contact details. Update them in myIR and we’ll do the rest. Register now at IRD.govt.nz”
If a taxpayer checks MyIR they will see an orange exclamation mark next to any debt. Until recently IRD also said that the debt may be incurring penalties and interest. but only if it is overdue, or due next year or the year after. Ha ha.
In all of the above IRD has largely failed to distinguish between taxpayers who have not engaged an agent and those that have. IRD is disenfranchising the group that helps IRD the most.