New Zealand’s tax authorities are looking to collect transaction data at a much larger scale. Inland Revenue already collects datasets on transactions facilitated by payment providers. However, as electronic payments are now the main way businesses make sales, authorities say there is a need to enhance data collection.
What is the purpose of enhanced transaction data collection?
According to the New Zealand government’s discussion document, increasing data collection has numerous benefits.
Authorities note that the type of information collected under the proposal will be the same as is currently collected, but more regularly, and from a greater number of providers. The move helps ensure compliance costs apply equally to all providers. Secondly, the new process will be more transparent and more widely publicised. Inland Revenue says the move will make data collection more transparent for individuals.
Transaction data collection means better tax surveillance
Of course, the central role of data collection will be enhancing the tax system. Regular transaction data collection enables tax authorities to identify anomalies and assess VAT compliance and potential tax evasion.
As with data collection rules in Australia, New Zealand’s tax authority wants identify areas of non-compliance in the hidden economy.
Efforts by tax officials in Australia and New Zealand are in line with the global move to monitor VAT compliance using advanced digital technology.
The cost of compliance
New Zealand’s authorities acknowledge that the “potential for compliance cost increases are mostly due to the increased frequency of data collection.” However, they say that businesses can mitigate the costs through more efficient processes.
VAT implication for New Zealand taxpayers
In recent times, digital interventions have changed the way VAT compliance is monitored. Interventions include: real-time reporting and enhanced digital reporting requirements. They also comprise increased data sharing requirements for third parties, as outlined by New Zealand’s revenue service.
Businesses therefore need to ensure they have the appropriate digital VAT compliance systems in place to meet the rigorous new demands of global tax authorities. In short, if you have VAT obligations, tax authorities are more likely than ever to detect and penalise noncompliance.
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