Minister McClay seeks to water down 130-year-old tax secrecy provisions

Wednesday 11th November 2015

Revenue Minister Todd McClay is seeking feedback on plans to water down New Zealand's 130 year old tax secrecy provisions as part of a tax administration law review that would give government agencies more access to tax department data.

McClay wants to update the country's 21 year Tax Administration Act, releasing a discussion document on making tax simpler in tandem with another paper aimed at making it easier for companies to pay income tax and GST. The tax legislation review proposes relaxing tax secrecy laws, which it says are "considerably broader" than most other jurisdictions, to only keep information confidential that would directly or indirectly identify a taxpayer.

"Narrowing the tax secrecy rule would allow Inland Revenue to assist with more requests for information when that information is anonymised, and in many situations, aggregated," the paper said. "Given the current desire for greater sharing of information between government agencies, and the analysis currently occurring to improve the flow of information, it is worth considering how the Tax Administration Act might be amended in the near term to support information sharing."

McClay told the Trans-Tasman Business Circle the government wants to weigh up the balance between keeping taxpayer information confidential while using that information to provide better services.

The paper says tax secrecy has traditionally been considered necessary to note compliance and has been said it was the quid pro quo for Inland Revenue's broad powers to collect information by balancing privacy interests on one hand with assessing tax liability on the other.

"The coverage of the general secrecy rule is not limited to taxpayer-specific information, rather to all information relating to information relating to the legislation administered by Inland Revenue," the document said. "This means that even statistical information that does no identify particular taxpayers is covered by tax secrecy and cannot be disclosed unless it is for tax purposes or some specific exception is contained in the legislation."

The secrecy rule has been whittled away over time by exemptions, and is a starting point for the tax department, with a number of those exceptions relating to cross-agency disclosure.

In the 2013 performance improvement framework review of IRD, lead reviewer Graeme Scott said the tax department hadn't suffered reputational damage from an unauthorised data release like some other agencies, and that plans to share more information with entities that didn't share its commitment to data security didn't absolve it of responsibility for protecting that information.

"Collaboration will raise issues of contrasting cultures more widely and merging functions and outsourcing among agencies will have to be deliberate in considering these issues of organisational culture," Scott's review said. "This is an issue for the government as a whole to resolve but when it comes to IR’s data, it will be on the frontline."

The tax law discussion document said the government has an important focus on addressing organised crime, and Inland Revenue holds information that may help law enforcement, and is "giving particular consideration to how to use information more effectively" including sharing non-individual information held by the tax department. That also extends to cross-border sharing, with increased expectations required by the US legislation aimed at preventing tax evasion by US citizens.

The paper also proposes letting taxpayers consent to the release of their information to a third party.

The document also seeks feedback on proposals to extend the tax department's information collection powers into cloud-based storage and large data sets held by third parties.

Other areas the paper is looking include the IRD's commissioner and how the role to maintain the integrity of the tax system aligns with State Sector Act demands for accountability, and how enhanced digital interaction will impact on tax agents and taxpayers.

BusinessDesk.co.nz

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