At least once a month I am asked the question “What is the likelihood of the revenue authorities finding out about my XXXX”. My response is always the same “What is the likelihood of them not finding out about your XXXX”.
The powers that revenue authorities around the world have, to enquire into your affairs are exceptionally broad (ask those who have been in the cross-hairs of the Inland Revenue), but the ratio of Revenue officers to taxpayers does however necessitate a ‘smart’ approach by revenue authorities to determine who they should be focusing their time on.
This is partly achieved by working within a self-assessment system, where compliance is encouraged by way of various amnesty programmes and punished by way of penalties and interest.
This month legislation was progressed in New Zealand to enable the sharing of information from financial institutions more readily. This is often referred to as the Automatic Exchange of Information. For those who have been relying on the fact that they are small fish in a big pond, the visibility of their investments to revenue authorities around the world will be taking a giant leap forward under the Automatic Exchange of Information.
What is (perhaps) more relevant is that New Zealand is relatively late to the party on this. Those who have US tax filing obligations may be aware of FATCA legislation that requires banks (and other financial institutions) around the world to provide their details to the IRS in the US. The Automatic exchange of Information is a sort of extension of FATCA, with banks around the world having to share similar information with other the Revenue authorities in a larger number of countries than just the US.
The first ‘wave’ of countries are already on-board (including the UK), so those with undeclared UK investments (for example) might want to take an urgent look at whether they wish to voluntarily declare those investments (which can be done in a penalty free manner) before Inland Revenue receives details of those investments from the UK banks.
We realise that articles that frighten taxpayers into compliance aren’t always helpful. Our parting comment is that you don’t need to be scared, just make sure that you are informed and take the action that you consider necessary.
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