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.