Tony Morris: Inland Revenue Manager on more than $150m in undeclared tax from the property sector

The IRD has uncovered more than $150 million is undeclared tax and GST from the property sector.

Developers and rental property owners haven’t been paying the correct GST, income tax and bright-line test taxes.

Inland Revenue Senior Manager Tony Morris talks to Heather du Plessis-Allan about the revelation.

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Episode Transcript

Speaker 1 (00:00):
Now the IID has uncovered more than one hundred and
fifty million dollars of undeclared tax tax should say, in
the property sector, developers and rental property owners haven't been
paying the correct GST income tax and brightline test taxes.
Tony Morris is an Inland Revenue senior manager and with
us now, Hey, Tony.

Speaker 2 (00:18):
Hi, Heather, thanks for inviting me.

Speaker 1 (00:20):
Yeah, thanks for talking to us. Is it accidental or deliberate?

Speaker 2 (00:24):
It's a mixture of both actually, because there's a range
of things we do with property and we've been investing
in our sort of compliance activity over the last couple
of years and not last year with extra money from
the government. It's a range of mistakes that we try
to help people with an educate and then there is
some stuff that's deliberate.

Speaker 1 (00:42):
Oh what proportioned Erican is deliberate?

Speaker 2 (00:46):
Had to say an actual proportion, because you could talk
about either money or the number of different tax payers
who do that. But probably what we see sometimes, especially
in the GST area and the property developers, as with
the GST, people can quite often get refunds up front
for the expenses they pay on developing or on on

(01:09):
buying a property and then selling it. So sometimes people
claim the refund and when they go to sell it
not always return that amount that they that they should
do when they sell. And some people actually tend to
use IR as a bit of a finance opportunity to
get to get the refund and then a lot to
use that to buy the next section rather than patch
pay the tax. And one thing with GST we should

(01:31):
remember is that's actually sort of the people that bought
the properly originally giving the GST to the property developer
or such like, in they're then meant to pass it
onto ID because it was never their money. So we see,
we see a little bit of that. But we've got
so much better data and intelligence tools now we've been
really investing in that, so we we do know now

(01:52):
every time someone sells property in New Zealand, and our
system can match quite quickly to see whether we think
that's when a property is sold that they should pretend
some text on that and the next return. So we
actually advise them as soon as we know that that hey,
we see you sold a property, well done, but emeric
looking forward to seeing that in the next return or

(02:14):
payment and I love.

Speaker 1 (02:15):
That well we're going to pay up.

Speaker 2 (02:18):
Okay, So we try to start with a nice message.

Speaker 1 (02:20):
Yeah, fair enough, I love it. Okay, So are you
telling me now? Like back in the old days you
could pretend you could probably be like, oh nah, I'm
just not going to declare it like it was like
an honesty box system with the bright line test. That's
no longer the case. You're going to. It's going to
pring with you, it's going to flag with you, and
you're going to know when people need to be paying
you up automatically.

Speaker 2 (02:39):
Yeah, well we're going to We're going to know that
you sold a property, and our system will tell us
whether there's a good chance that you might have to
pay text on it, which does won't get it one
hundred percent right, but we will notify you, know, to
see that you may be liable and let us know
if you're not work with us if you want to,
or we expect to see them the next return. And
if people don't follow it and we think they should

(03:01):
have paid or that, then we can get onto them
straight away and even raise an assessment against them. So
we can start sort of collecting the text as well,
really early, rather than wait quite a few months and
what we find is when we are contacting people who
do need to pass the text, they caught us and
do what we call a voluntary disclosure and sort of disclosure.
I should return it and then we work with them

(03:23):
to settle everything up. Then.

Speaker 1 (03:25):
Yeah, brilliant stuff. Hey listen, Thanks very much, Tony, I
appreciate it and well done, as you say, good message
up front, Well done on getting all the money in.
Tony Morris, Inland Revenue senior Manager. For more from Hither
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