Inland Revenue attacked over pointless penalties

By Rob Hosking

Friday 29th August 2003

Parliament needs to give Inland Revenue a clearer mandate for flexibility, MPs were told this week.

Tax expert Jeff Owens told Parliament's finance and expenditure select committee tax officials needed to make greater allowance for genuine mistakes, and MPs needed to give the IRD permission to make those allowances.

Mr Owens said a client of his was up for $100,000 because of an error made by a low-ranked staff member. That error had not cost the IRD anything it involved the double counting of an imputation credit for dividends.

"The dividend was never paid and it only existed as a credit to the shareholder's current account. So there was no loss to the Revenue. But the department did not accept that and the company was required to pay around $100,000 in income tax, along with a 10% penalty." In the end a settlement was reached but that was largely on a technicality, Mr Owens said.

And while he supported the general direction of the clauses in the Taxation (Annual Rates, GST, Trans-Tasman Imputation and Miscellaneous Provisions) Bill, he said there were still some anomalies that caused unnecessary penalties to taxpayers.

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