Hamish Fletcher

Hamish Fletcher is a business reporter for the NZ Herald

Clawback less than expected

The IRD established a concession arrangement after winning the so-called "Penny and Hooper" tax avoidance case. Photo / David White
The IRD established a concession arrangement after winning the so-called "Penny and Hooper" tax avoidance case. Photo / David White

The $4 million Inland Revenue has collected following a landmark court decision on tax avoidance last year will be less than officials were expecting to claw in, says a Deloitte tax partner.

Hundreds of taxpayers are believed to have been affected by a Supreme Court decision that found two orthopaedic surgeons - Ian Penny and Gary Hooper - had avoided income tax by paying themselves low salaries through a structure of companies and trusts.

Following the judgment, the IRD said those who make voluntary disclosures would need to pay extra tax only for income earned during the previous two years. Those who do not reveal an incorrect tax position can be audited back four years and may face penalties.

Inland Revenue yesterday extended the deadline for voluntary disclosures until March 31 next year and said over 170 taxpayers had paid more than $4 million since the Penny and Hooper decision.

Tax specialists talked to by the Herald could not say how much the IRD hoped to get in as a result of the decision, but Deloitte's Greg Haddon believed the amount received to date was less than the department had expected.

"I think the IRD believe that what they've picked up is light," said Haddon.

The IRD is sending letters to those believed to be affected by the change and expect they will have contacted 500 people by this time next year.

Ernst & Young tax partner Jo Doolan said the extension of the IRD's offer was welcome but that taxpayers were "justified in having a sour taste in their mouth".

"The way the IRD continues to try to rewrite our tax laws by applying the anti-avoidance rules ... leaves one with the feeling the [IRD] is trying to squeeze the last bit of toothpaste from an already-empty tube."

- NZ Herald

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