New law brings tax debt relief, greater certainty for taxpayers

Legislation enacted today will provide relief for many people who get into tax debt, introduce fairer instalment arrangements for paying off tax debt, and give Inland Revenue greater flexibility in dealing with taxpayers' debt problems.

"The new Taxation (Relief, Refunds and Miscellaneous Provisions) Act clarifies, for both the public and Inland Revenue, the appropriate treatment for taxpayers who are finding it difficult to pay their tax bills," Revenue Minister Michael Cullen said.

"The problem of spiralling tax debt was a recurring theme in the findings of the Finance and Expenditure Committee's 1999 inquiry into the powers and operations of Inland Revenue. This goes a long way towards meeting those concerns, and complements reductions in late payment penalties legislated for last year.

"Underlying these changes is the principle that tax laws that are too lenient or too harsh discourage voluntary compliance, which is the backbone of the modern tax administration. The new law strikes a sensible balance," Dr Cullen said.

The new Act also:
* introduces comprehensive new rules governing the transfer of overpaid tax within a taxpayer's account or to another taxpayer, changes that give taxpayers greater certainty;
* removes the risk that warranty agreements by offshore warrantors will attract GST twice, a change that is particularly important to importers of motor vehicles and other goods under warranty;
* clarifies the law relating to the tax treatment of wage-related provisions when a business is sold and employees are transferred;
* introduces changes to prevent the over-taxation of widely held unit trusts and "Category A" group investment funds, resolving a longstanding tax problem for the unit trust industry;
* introduces further measures aimed at simplification of the tax system and reduction of tax-related compliance costs;
* clarifies the law to ensure that charities and other non-profit bodies can claim GST refunds on all their activities except exempt activities, such as the sale of donated goods.

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