IRD tells real estate agents to open books
By SEAN SCANLON - Sunday Star Times | Sunday, 09 December 2007
The country's top 1000 property speculators are being targeted in an Inland Revenue crackdown on unpaid taxes.
As part of the campaign, IRD staff are visiting real estate agents with warnings that sales and purchase information would have to be disclosed if requested.
In this year's budget, the IRD got an extra $14.6 million to target tax evasion in the property market.
A Wellington real estate firm, which declined to be named, said it was dismayed that a recent IRD visit warned of possible sales and purchase auditing.
"At the end of the day it shows they can come in here and do anything," an agent said.
IRD assurance group manager Martin Scott said its visits to real estate offices included a presentation on the obligations involved in property transactions.
The 1000 people identified with extremely high numbers of property transactions would be contacted to see if they would make "voluntary disclosures" about their tax returns.
"Some people have a belief you don't have to pay taxes on housing profits but depending on the purchaser's intent it could be taxable."
He declined to say how IRD identified property profiteers but said it used audit powers that required "third parties" such as real estate agents to disclose information about their clients.
"Yes, we do have powers to request information but at this stage these visits [to agents] are more about where we are going and what to expect from us. We would give them [agents] scenarios on what we would consider taxable and what we wouldn't."
By making voluntary disclosures people could limit or avoid penalties, Scott said.
"We are not trying to trap people. We are working to ensure that people have the information they need to do the right thing."
New Zealand Property Investors' Federation Otago president Cliff Seque said the IRD had more powers than the police to search for information.
"It is very easy to track people down and find that they are trading in property, developing and pocketing the profits. If you are trading and living off the profits of buying and selling property you have to pay tax like everybody else has to."
Seque said the IRD had to prove a property buyer's intent.
"I know there were cases in Wanaka where they were buying and selling sections even before the titles were issued. So it's very hard to prove the intent was to keep it and build on it."
Real Estate Institute president Murray Cleland said the IRD's tactics were encroaching on clients' privacy.
Act leader Rodney Hide said he had had "considerable experience" with property investors who have unwittingly got themselves in trouble with the IRD.
"It can be really tough applying the tax laws to property development.
"The IRD has come up with new and novel ideas that have just tipped people over.
"It would be very helpful if parliament would provide clearer rules so that people knew where they stood. No one wants to defend tax evasion but there are real difficulties for investors especially mum and dad investors."
http://www.stuff.co.nz/sundaystartim...7361a6005.html
By SEAN SCANLON - Sunday Star Times | Sunday, 09 December 2007
The country's top 1000 property speculators are being targeted in an Inland Revenue crackdown on unpaid taxes.
As part of the campaign, IRD staff are visiting real estate agents with warnings that sales and purchase information would have to be disclosed if requested.
In this year's budget, the IRD got an extra $14.6 million to target tax evasion in the property market.
A Wellington real estate firm, which declined to be named, said it was dismayed that a recent IRD visit warned of possible sales and purchase auditing.
"At the end of the day it shows they can come in here and do anything," an agent said.
IRD assurance group manager Martin Scott said its visits to real estate offices included a presentation on the obligations involved in property transactions.
The 1000 people identified with extremely high numbers of property transactions would be contacted to see if they would make "voluntary disclosures" about their tax returns.
"Some people have a belief you don't have to pay taxes on housing profits but depending on the purchaser's intent it could be taxable."
He declined to say how IRD identified property profiteers but said it used audit powers that required "third parties" such as real estate agents to disclose information about their clients.
"Yes, we do have powers to request information but at this stage these visits [to agents] are more about where we are going and what to expect from us. We would give them [agents] scenarios on what we would consider taxable and what we wouldn't."
By making voluntary disclosures people could limit or avoid penalties, Scott said.
"We are not trying to trap people. We are working to ensure that people have the information they need to do the right thing."
New Zealand Property Investors' Federation Otago president Cliff Seque said the IRD had more powers than the police to search for information.
"It is very easy to track people down and find that they are trading in property, developing and pocketing the profits. If you are trading and living off the profits of buying and selling property you have to pay tax like everybody else has to."
Seque said the IRD had to prove a property buyer's intent.
"I know there were cases in Wanaka where they were buying and selling sections even before the titles were issued. So it's very hard to prove the intent was to keep it and build on it."
Real Estate Institute president Murray Cleland said the IRD's tactics were encroaching on clients' privacy.
Act leader Rodney Hide said he had had "considerable experience" with property investors who have unwittingly got themselves in trouble with the IRD.
"It can be really tough applying the tax laws to property development.
"The IRD has come up with new and novel ideas that have just tipped people over.
"It would be very helpful if parliament would provide clearer rules so that people knew where they stood. No one wants to defend tax evasion but there are real difficulties for investors especially mum and dad investors."
http://www.stuff.co.nz/sundaystartim...7361a6005.html
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