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Taxpayers and businesses punished by IRS backtrack


7 December 2012

Taxpayers and businesses punished by Inland Revenue backtrack

Inland Revenue announced late yesterday that it is retrospectively changing its view on the taxation of accommodation allowances. The Commissioner has announced that most accommodation allowances are taxable, regardless of whether the person maintains a home in another place.

This is in direct contradiction to current practice.

NZICA is deeply concerned at this retrospective change. Inland Revenue is aware that the substantial majority of taxpayers treat the accommodation “benefit” as being a net concept – using long-established Inland Revenue policies – so that the allowance is not taxable if the person maintains a home somewhere else.

The Commissioner has suggested that a blanket discontinuation of Technical Rulings was a clear message to the taxpaying community that this particular policy – the “net benefit” concept – could not be relied on.

The Commissioner has also attempted to justify a retrospective change in policy by suggesting that there has been a legislation change. The rewrite of the legislation into plain English was not intended to change the law. Rather, the Inland Revenue has changed its interpretation of the law; and intends this change to have retrospective effect.

“The Commissioner should apply a future application date to a change in policy that is unfavourable to the taxpayer,” says Acting General Manager Tax Jolayne Trim.

“This change is going to have a significant impact on industries reliant on itinerant workers – agriculture, the Christchurch rebuild and our film industry”.

“NZICA considers this to be a retrospective law change of the worst kind – Inland Revenue is aware that the substantial majority of taxpayers take a different view. Inland Revenue is taking the chance that taxpayers will not have the resources available to question the commercial impracticality of its announcement. The consequence of such an approach is a significant loss of taxpayers’ confidence in the integrity of the tax system,” Ms Trim says.


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