Even with a starting point of tax secrecy, Inland Revenue already shares a significant amount of information with other agencies, as set out in the diagram below – so this is not a new concept. The proposals the Government is consulting on seek to modernise and clarify the rules to better provide for confidentiality and information sharing in the future.
The Government proposes a new framework for protection and disclosure of taxpayer information. The aim is to provide greater transparency and cohesion about when it is considered appropriate to disclose taxpayer information. It also aims to give greater flexibility to disclose information across government, if considered appropriate, in a transparent and controlled way.
The four key exceptions to confidentiality cover disclosures:
- for purposes related to the tax system
- to the taxpayer or their agent
- relating to international agreements
- to other government departments for non-tax related purposes.
Exception 1: Disclosures for purposes related to the tax system
The primary reason for disclosing taxpayer information is for purposes relating to the tax system, in order to administer the laws for which Inland Revenue is responsible. This is why Inland Revenue collects information and will remain the primary exception to the new taxpayer confidentiality rule.
This will be a broad exception, and will consolidate specific exceptions that currently exist throughout the legislation. For example there are current specific exceptions relating to child support, KiwiSaver and student loans disclosures; publication of product rulings and approved organisations; and prosecution of revenue-related offences (when the prosecution is under the Crimes Act or by the Serious Fraud Office). Most, if not all, of these specific exceptions could be included within the exception for purposes relating to the tax system.
Exception 2: Disclosures to taxpayers and their agents
Disclosures to taxpayers and their agents is another area where significant change is not anticipated. An exception similar to the current one will remain.
A key part of the modernisation of the tax system is enabling taxpayers to interact more easily with Inland Revenue. In many cases this will be through business software – such as GST return filing directly from accounting software. Inland Revenue in turn will be able to send information, confirmation and messages directly to taxpayers’ business software. The TAA was recently amended to clarify that the transmission of customer-specific information via business software provided and maintained by a software intermediary does not breach the secrecy provision. This approach will be carried forward into the new rules.
Exception 3: International disclosures
The sharing of tax information across revenue agencies internationally is not a new concept and exceptions permitting international information sharing have been in place since 1946. However, recent initiatives such as the Multilateral Convention on Mutual Assistance in Tax Matters, the US Foreign Account Tax Compliance Act and the OECD-led Automatic Exchange of Information (AEOI) have significantly increased the volume and automation of sharing, and will continue to do so in the future.
Sharing information under the Double Tax Agreement and Tax Information Exchange Agreement network will remain part of the core legislative framework, and no substantive change is proposed as part of this consultation.
Exception 4: Disclosures to other government agencies for non-tax-related purposes
Legislation already permits a considerable amount of cross-agency information sharing. However, there is no readily apparent consistent principle to these exceptions. Some are narrow, others broader, and in many cases legislative change has been made for the avoidance of doubt, even for minor changes to information exchanges.
However, two newer exceptions are broader and allow sharing that meets certain criteria to be authorised by order in council. These exceptions offer a greater degree of transparency, as the order in council and the underlying memorandum of understanding are often published. Such arrangements can also provide for public reporting on the information transfers. This is not the case for much of the information sharing authorised by specific legislative exceptions in the TAA.
Taxpayers are required to provide their information to Inland Revenue for reasons of public good, the administration of the tax system and social policy programmes. The Government’s view is that it is appropriate to consider other “public good” uses of the information, particularly when these are consistent with or complementary to the direct reason the information was collected. This discussion document focuses on this type of information sharing. Greater care should be taken in considering uses of the information that move away from the public good, and the Data Futures Partnership will continue to explore these boundaries.