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Revenue Minister Todd McClay says IRD audits sales reports from fast-moving suburbs to target property speculators

Property
Revenue Minister Todd McClay says IRD audits sales reports from fast-moving suburbs to target property speculators

By Lynn Grieveson

Inland Revenue uses real estate sales reports for suburbs with rising house prices to identify possible property speculators, according to Revenue Minister Todd McClay.

McClay was making his first appearance before the Finance and Expenditure Committee on Wednesday, where he said Inland Revenue had proved quite efficient at "gaining a return for the taxpayer" when tasked with improving property tax compliance.

Answering a question from National MP Jamie-Lee Ross about reports that NZ$53 million in discrepancies had been found, and that there was a return of $8.40 for every $1 spent by Inland Revenue on the project, McClay said the returns on the funding had initially been even higher than that.

"The $53 million extra that you mentioned that was collected was for last year alone," he said.

"We started an initiative in 2010 where additional resources were given to Inland Revenue to look at property compliance and the returns have been initially higher than that and have levelled out at that level."

McClay went on to give some detail about the process used by Inland Revenue to identify investment property owners who should be paying tax on profits made when they sell the property.

"The way Inland Revenue does this, I understand, is they look at an area of the market where there may be movements and fluctuations. They will go in and study sales, go and do a number of audits and, as they would in any parts of the economy, they go through on a more case by case basis and target these areas," he said.

"There would be people who are not fully aware of their obligations or they have made a mistake, and there will be others who willfully don't want to meet their obligations. It would be my expectation for the first that Inland Revenue works with them, educates them, advises them and collects the extra tax off them."

"When people are willfully and knowingly not meeting their obligations I would expect all legal avenues by Inland Revenue would be used," McClay said.

Capital Gains Tax windfalls too?

The government has argued Labour's proposed capital gains tax on investment property is unnecessary due to the already existing tax on property speculation.

However, McClay was careful not to play into the opposition's hands by demonstrating what an impressive revenue earner a capital gains tax could be, going on to say that people needed to "keep this in perspective."

"So NZ$53 million in one year is important, but Inland Revenue collects NZ$54 billion worth of revenue a year. It's important we do this from a fairness point of view, but we need to keep this in perspective as well."

Labour finance spokesperson David Parker then questioned McClay.

"How can you sit there with a straight face and say you are pursuing fairness when you won't tell us what proportion of investment housing is taxed on the economic profits that are made on its sale, when you know it is closer to zero percent than it is to 100 percent,?" Parker said.

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5 Comments

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I hope when Labour get into power that they do not bring in a CGT regime where owners of assets (other than family homes) have to calculate the capital gain in each financial year and pay tax on it accordingly. Currently New Zealanders who have overseas shares have to pay tax on gains each year.

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I think Labour's CGT is on realisation. 

 

A thought occured to me yesterday - if I were to win the lotto powerball and Labour enacts their CGT, I'd have to pay CGT on that. Wipe 15% of that jackpot then. There's too much focus on CGT being a tax on "property speculators" when actually it will impact almost everything.

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This is true, we would have to put up with the whining of disgruntled lottery winners in the same way other countries do. 

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It will start that way initially, but they'll chase the dollar.  They just can't help themselves.

they see "$53M recovered", I see $53M more stolen,  removed from private economy to be wasted by guzzlement.

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