B2000: Towards a stronger, fairer tax system
Hon Dr Michael Cullen
Minister of Revenue
15 June 2000
Towards a stronger, fairer tax system
The Inland Revenue Department gets a funding boost of $35.7 million in the Budget.
Revenue Minister Michael Cullen said the increase was "a significant improvement" on what might have happened had there not been a change in government.
"The IRD was scheduled to take a $30.4 million cut in the 2000-01 financial year. We could not allow that to proceed as it would have damaged the department's ability to do its job properly. This Government is committed to rebuilding capacity in the State sector and to promoting a strong and effective public service," Dr Cullen said.
The additional money would assist the IRD to administer the tax system, discourage avoidance and implement the Finance and Expenditure Select Committee's recommendations to make it easier for taxpayers to understand and meet their tax obligations.
"Legislation is now before Parliament to reduce the incremental penalty for late payment of tax, expand the IRD's discretion to cancel, remit or accept payment by instalment and extend the application of these hardship provisions to all tax types.
"Other initiatives arising from the FEC inquiry on the IRD's agenda for the 2000-01 financial year include a review of the compliance and penalties regime and the re-establishment of a new complaints management process.
"These changes have a common theme, to make the IRD more responsive to the needs of the individual taxpayer," Dr Cullen said.
The Government will introduce legislation this year to require trust distributions of beneficiary income to minors to be taxed at the 33 percent trustee rate. This will limit the benefits of any income splitting through directing trust income to children. Currently this income could be taxed at rates as low as 19.5 percent. By way of comparison, Australia taxes most trust income distributed to minors at 47 percent.
"We are considering allowing limited exclusions to this new rule - for example, for court-ordered trusts.
"We will also legislate to remove the ability of a company to elect the 19.5 percent resident withholding tax rate. Companies which choose the lower rate rather than the 33 cent corporate rate obtain a short-term timing advantage before the discrepancy is made good upon payment of provisional or terminal tax.
"The Government will develop and consult on these proposals over coming months with the aim of bringing them into effect by 1 April, next year," Dr Cullen said.