Articles by John Rowe
Recently we’ve noticed some IRD auditors jumping from an initial (you’re being audited) letter, straight to statutory demands for information within unrealistic timeframes. Historically IRD have tended to work constructively with the taxpayer to find mutually acceptable timeframes. Unfortunately, there appears to be a developing trend where some IRD investigators have been using their statutory powers as a means of force to apply unnecessary time pressure, rather than trying to work with a taxpayer and their agent. We note with some concern that the use of these types of tactics seems to have been increasing.Historically, the IRD would sent out a letter, notifying tax payers of a risk review (i.e. checking of limited areas) or a full audit. Then a reasonable timeframe would be negotiated, taking into account the client’s business and the workload both of the client and their advisers. Traditionally the IRD has been very accommodating. Now, however, we have been noticing a few instances where investigators are requesting information they are not entitled to or which exceeds their authority.
Rather that working constructively, certain investigators are using statutory powers to demand information, which can lead to the breakdown of relationships between the IRD, taxpayers and their advisers. This risks the matter turning from a straightforward audit into an adversarial process, which should be avoided, if possible. Additionally, practitioners have generally had good working relationships with IRD which is in the best interests of IRD and taxpayers, as it encourages everyone to meet their responsibilities. If investigators stretch the rules and processes, it risks undermining that previously constructive position.To illustrate, the IRD recently demanded that a client provide them with 15 years of information, when they are legally only required to hold such information for seven years. When we made this point, IRD issued a statutory demand for information to be supplied within an unreasonable timeframe, and it looked as though they were extracting revenge for us correcting them. This is not the right way to deal with such matters – a satisfactory outcome for all concerned is far more likely to be achieved if the taxpayer, their advisers and IRD work constructively together. Bullying and scare tactics are counterproductive and cause unnecessary stress for everybody.
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