Summary of proposed amendment
Use of money interest (UOMI) is charged when a taxpayer fails to make a payment of tax on time. There are some legislative mechanisms that allow UOMI to be remitted, however, these are not fit for purpose to respond to the nature of the economic shock caused by COVID-19.
The proposal would allow the Inland Revenue to remit interest on a late payment if the taxpayer’s ability to make the payment on time was significantly adversely affected by the COVID-19 outbreak. This would include both when a taxpayer is physically unable to make a tax payment on time and when a taxpayer is financially unable to make a tax payment on time because of the economic nature of the COVID-19 outbreak.
The proposed amendment would come into force on the date of enactment of the Bill (the date on which it received the Royal assent). However, the amendment would give the Commissioner the ability to remit interest that has accrued on tax payments due on or after 14 February 2020.
The proposed ability for the Commissioner to remit interest related to COVID-19 would expire 24 months after the enactment date unless extended by an Order in Council.
The proposal would add new section 183ABAB to the Tax Administration Act 1994. This section would allow the Commissioner of Inland Revenue (the Commissioner) to remit use of money interest if a taxpayer’s ability to make a tax payment on time is significantly adversely affected by an outbreak of COVID-19. This would include both where a taxpayer has been physically unable to make a payment on time, for example, because they have been quarantined, and where a taxpayer lacks the financial means to make a payment on time because of the economic impacts of COVID-19.
The Commissioner’s discretion to remit interest would only apply to interest that has accrued on tax payments due on or after 14 February 2020.
For the Commissioner to remit interest the taxpayer must ask the Commissioner to remit the interest and the Commissioner must be satisfied that the taxpayer has asked for the relief as soon as practicable and made the payment of tax as soon as practicable. The interest would not be remitted until the core tax debt has been paid.
Inland Revenue is developing guidance on when a taxpayer would be considered eligible for interest to be remitted and this would be published following the Bill being enacted. Preliminary guidance is available at https://www.ird.govt.nz/covid-19-novel-coronavirus/tax-relief/uomi
The Commissioner’s ability to remit interest would only apply for 24 months following the enactment date. However, this period would be able to be extended by an Order in Council made on the recommendation of the Minister of Revenue. This Order in Council would need to be made within the initial 24 months during which the Commissioner can remit interest.
The extension to the time limit would expire after the period given by the order or 6 months after the order came into force if the order did not specify a time limit. However, the time limit could be extended further by subsequent Orders in Council so long as they are made before the date on which the preceding order would expire.
In recommending the making of an Order in Council, the Minister of Revenue would need to be satisfied that the ability of taxpayers to pay tax on time is likely to continue to be significantly adversely affected by COVID-19 beyond the expiry of the time limit. As such, it is unlikely that the time limit would be able to be extended by Order in Council once the COVID-19 outbreak has concluded.
The purpose of UOMI is to compensate the Government for the loss of use of money from taxpayers underpaying their tax. It applies to all tax types administered by Inland Revenue, including income tax and GST. UOMI also applies to underpayments of tax that are withheld at source, such as PAYE and RWT. UOMI also applies to Working for Families debt.
In certain circumstances the Commissioner may remit UOMI on a late tax payment. For the remission of interest in response to emergency events, the current rules provide for an Order in Council process to allow the Commissioner to remit UOMI where a taxpayer is “physically prevented” from making a payment. However, the Commissioner cannot remit interest for a taxpayer that is financially unable to make a payment on time because of the emergency event.
The current rules around remitting UOMI in emergency events are directed at situations or events where public safety is of paramount concern because of the risk of injury or death, typically due to a natural disaster. However, the current statutory framework is not fit for purpose to respond to the nature of the economic shock of COVID-19 where a taxpayer may be financially unable to pay their tax on time.
(Clauses 32 and 34)
Summary of proposed amendment
The proposed amendment would allow Inland Revenue to share taxpayer information with other government departments to assist the efficient and effective delivery of the Government’s COVID-19 response. The amendment would only apply for up to two years.
The proposed amendment would apply from the date of announcement of the change, being 17 March 2020. The amendment would apply for a period of two years only unless extended by an Order in Council. This would allow the Government to continue sharing information, if required, in response to COVID-19 after the two-year period.
The proposed amendments would allow Inland Revenue to share information with other government agencies in order to respond to the COVID-19 outbreak. This proposal would be targeted, time limited, and only used when existing legislative provisions are not adequate to share information.
The other agencies Inland Revenue would share information about persons or entities with are Government departments, the New Zealand Police, ACC, and Kāinga Ora. The information would only be shared for the purpose of enabling those agencies to provide assistance to individuals and businesses, fulfil any obligation or function, or exercise any power in response to the COVID-19 outbreak. The information shared would not be available for use in administering other assistance not related to COVID-19.
The information that could be shared would be both individual and non-individual information and may include, but is not limited to, identifying information, contact and location information, financial information, and family information. The provision would also enable information to be shared to enable the government agency to undertake compliance activity related to that COVID-19 assistance.
An example of where the information could be provided is to assist in determining entitlement to any temporary income assistance package or the auditing of any assistance claims to counter fraud.
Currently, tax legislation requires those persons who have access to taxpayer information to keep that information confidential and not disclose or use it for a purpose other than that for which it was provided. This requirement would also apply to the proposed information sharing provision to assist the response to the COVID-19 outbreak.
As a safeguard, Inland Revenue would retain a discretion as to whether to share information and sharing would only occur where the information is readily available, it is reasonable and practicable to share, and it is not undesirable to share the information.
Currently, tax legislation requires Inland Revenue staff to keep taxpayer information confidential unless a specific legislative exception authorises the disclosure. There are a number of exceptions in the tax legislation enabling Inland Revenue to share information with other agencies. These existing exceptions will be used, where possible, to share information with other agencies to assist in the response to the COVID-19 outbreak.
However, there may be situations where, as a result of the outbreak, it is desirable for Inland Revenue to share information with other agencies with which Inland Revenue does not have any existing arrangements or where the existing arrangements are not flexible enough to allow the required sharing to occur.
A similar provision to the one outlined in the Bill applied during the Canterbury earthquake and allowed Inland Revenue to share information with other government agencies as part of the government’s response to the Earthquake. The proposed amendment is modelled on that provision.