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Taxman's robots to hunt out cash jobs.

Tori Sullivan in the New Zealand Herald, Tuesday, 10 April reported that it is one thing knowing you cannot beat the system. But that we must now must recognize the system has just got smarter and the  computer is also the one in charge.

IRD's robots now have the capability to identify businesses that may fail to report cash jobs.

The new computer system that IRD has introduced will make their  investigations further advanced. Already computers compare individual taxpayers with their peers in the same industry and location to help identify those who stand out.   For example if most hairdressers in similar circumstances have a 50% profit margin on all sales, IRD can identify any outliers with a suspiciously low profit margin. The taxpayer is no longer being compared only with it own trading history in circumstances but also to its peers and they will then be asked to explain any discrepancy.

But that sort of analysis will soon be able to dig deeper to, for example, compare taxpayers purchase of  business items with its peers. So if similar cafes produce and sell 100 coffees from each bag of coffee grounds why is a particular cafe returning the sale of only 80 coffees? Or if most builders can make sales of  $10,000 for each 1000 nails they purchased, why is this particular builder returning only 8000?

As a result audits will increasingly be identified not by IRD investigators pouring over taxpayer accounts but by artificial intelligence, based on the comparison between an individual taxpayers  records and those of all other relevant taxpayers. To achieve this, a bill before Parliament to extend their power to collect Lakes of data from all areas of the economy for which it can mine relevant data.

The onus and obligation will be on the tax payer to produce records to prove their innocence.

For example the cafe owner who returned only 80 sales per bag of coffee grounds may simply be inefficient, or provide free samples,or reward sales with discounts, or even be the victim of employee theft. Any all of these options will explain the discrepancy few small businesses keep the detailed records to verify it.

 

And In tax disputes, the taxpayer must disprove an IRD allegation. That will mean  an increase record keeping is required, creating increased compliance cost for businesses if they are to prove their own innocence. And In  tax  disputes the taxpayer must disproof any IRD allegation. That means increased record keeping is required, creating increased compliance cost for businesses if they are to prove their own innocence.  So the tax payer must carry the cost of proving that they are innocent when the computer concludes that they are out of line  based on anonymous and hypothetical models.


 


 

 

 

Sporadic 13th March 2018

An interesting article by Tony Alexander around blind spots that may arise in your business. The article also covers his thoughts around future growth for the NZ economy as well as his opinions on whether to float or fix interest rates.

Toney Alexander Sporadic-13-March-2018.pdf

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GST on Second Hand Goods

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Payroll Changes

Tax Pooling

Tax Pooling

Estimating your provisional tax can be difficult: pay too little and you will be hit with UOMI and other penalties; pay too much and valuable working capital is locked up at the IRD earning a minimal return.

The solution is to deposit your provisional tax payments into the tax pool held at Inland Revenue to reduce your exposure to UOMI and increase your return on overpayment.

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  • Estimated correctly?
      tax pooling solutions will transfer your tax payments from the pool to your taxpayer account at Inland Revenue at no charge.

An additional benefit of using  tax pooling solutions is that if you have an amount of income tax to pay for a prior year due to a reassessment by Inland Revenue, you can purchase back dated tax from tax pooling solutions at interest rates that are up to 30% cheaper than Inland Revenue's UOMI rate. By purchasing back dated tax on the correct payment date, Inland Revenue will not charge you UOMI. This can be used for most tax types, not just income tax.

Depositing into the tax pool is free and you'll never pay more than if you had paid directly to the Inland Revenue. Don't pass up this opportunity to improve your bottom line.

Talk to us about this.

New Options to pay provisional tax from March 2018



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