Put humanity back into taxation urge experts

By Mary Jane Boland and Andrew Young

The tax system needs to urgently become more flexible or the black economy and tax avoidance will soar, experts warn.

The Inland Revenue Department has been labelled heartless and militant after Wellington woman Bronwyn Mutton claimed her husband killed himself because he could not pay his ballooning tax bill.

The department commissioner, Graham Holland, said last night that he would look at the procedures and legislation and the way staff applied them. Changes would be made if needed.

But tax experts and consumer groups say there are mounting examples of department staff rigorously pursuing people for tax debts.

The president of the Federation of Family Budgeting Services, Raewyn Nielsen, said the department was far less flexible than two years ago.

She was furious to see a department brochure, released last year, advising people to get loans or extend their mortgage to pay tax.

"We understand it's Government money ... but there's a lot of other Government departments we are negotiating with who are more flexible."

A tax expert from PricewaterhouseCoopers, John Shewan, last night told the Holmes show that inflexibility encouraged people to avoid tax and do cash jobs.

This fuelled the black economy.

A New Zealand Herald investigation in November revealed a $3 billion-a-year black economy through cash jobs and tax evasion.

Lobby groups yesterday called for a tax ombudsman to be appointed to rule on cases where people are unable to or have not paid their tax.

Earlier this week, Bronwyn Mutton said on Holmes that her husband committed suicide because of his tax bill.

The bill, which Ian Mutton underpaid by $84 in 1989, rose within seven years to $84,000 - largely unpaid tax bills, interest and late-payment penalties.

Mr Mutton committed suicide, as did the couple's 13-year-old, Trevor, eight months later.

Mrs Mutton's accountant, John Mathews, said the department did not consider individual circumstances enough, despite a provision in the tax laws.

A spokesman for Inland Revenue, John Saunders, said tax debtors could negotiate instalment arrangements with the department but they should have tried to finance their debt through other methods first. Interest would continue to be charged on instalment arrangements. Bankruptcy and liquidation were last resorts.

The Public Service Association said ruthless Government policies were running down the department