Tougher action of property speculation questioned
18 May 2007
Tougher IRD action of property speculation questioned
Dr Cullen’s attempts in this week’s budget to curb aggressive property speculators failing to pay their fair share of tax may come up short in practice according to one tax expert.
Dr Cullen pledged a further $14.6 million to Inland Revenue in this week’s budget to strengthen its auditing of property transactions.
Andrew Dickeson, an Associate Director with chartered accountants Staples Rodway believes that while people support Dr Cullen’s attempts to ensure property speculators pay the appropriate amount of tax, the effectiveness of any increased audit activity is questioned.
“Neither Dr Cullen nor the IRD have stated specifically how the money will be spent, but presumably a large amount of the funding will be allocated to hiring appropriately skilled people to physically undertake the audits”, Mr Dickeson said.
Like many other areas of the professional services sector, a chronic shortage of suitably qualified tax specialists exists at the moment.
Training staff with little or no tax knowledge on the complex rules associated with property transactions will take some time. Indeed, historically many IRD investigators leave the employ of the Revenue once qualified to join the private sector.
Mr Dickeson believes that based on prior experience, the irony is that many of those employed by the IRD in more technical roles will end up providing tax advice to those involved in property speculation.
Another area where the IRD may struggle is in relation to those property developers that trade through a company, only to liquidate it shortly after the property has been sold.
“The IRD will find it exceedingly difficult to retrieve any potential tax from the property development company or its directors once the liquidation has occurred” Mr Dickeson said.