Chapter 6 – Disclosure Requirements and Penalties

6.1 Disclosure Requirements and Penalties

6.1.1 The objective of information disclosure is twofold. First, it provides the Inland Revenue Department with the base data necessary to administer the tax system. Secondly, it encourages taxpayers to comply with the law since they commit an offence if they fail to provide the information requested. New Zealand requires a much lower level of disclosure than countries such as Australia, the United States and the United Kingdom. Furthermore, our penalties for non-compliance are generally lighter than those applying in these countries. A combination of minimal disclosure and low penalties reduces compliance and makes enforcement more difficult.

6.1.2 Both of these matters need to be addressed in the context of the international tax reforms. The Department will be dependent in the first instance on the information provided by taxpayers. The objective of disclosure is not to obtain exhaustive information from every taxpayer. That would merely swamp the Department and impose unnecessary compliance costs on taxpayers. Rather, at the first level of disclosure, a small number of key questions should be asked of all taxpayers. This enables the Department to identify those taxpayers who should then be required to provide fuller disclosure.

6.1.3 The Committee will comment further on disclosure requirements and penalties in the context of the present reforms in Part 2 of its report.