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Lawyers, accountants incensed by IRD's plan to tax lease inducement

Monday 30th July 2012

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Law and accounting firms are upset at an Inland Revenue Department decision to begin taxing ‘lease inducement payments' made by landlords to lessees before a law change is enacted, saying it harks back to the antics of former Prime Minister Rob Muldoon in the 1970s.

The consultation document released last week says IRD would make lease inducement payments taxable as at the date of the paper, including any payment made by a landlord to a lessee to induce the lessee to enter into the lease.

"We object very strongly to a purported change of law by the IRD, a member of the executive branch of government," Chapman Tripp partners Casey Plunket and Graeme Olding said in a statement. "Changes to legislation only have effect when Parliament passes an amendment. Until that time, taxpayers are entitled to rely on the law as it is written on the books, not as proposed by the tax department."

IRD said its reason for setting the application date is to "minimise risks to the revenue base" in the event the government agrees to the changes.

"Anyone entering into lease arrangements after the date of the issues paper's release would be aware of the possible changes to the rules," a spokesman for the department said. "The proposed application date is, together with the other suggestions in the issues paper, subject to consultation and decisions to be made by government."

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