WELLINGTON - It is a shame Parliament's finance and expenditure committee kicked to touch the idea of a tax amnesty, says PricewaterhouseCoopers partner John Shewan.
Although generally complimentary about the fruits of the parliamentary inquiry into the Inland Revenue Department, Mr Shewan argues that an amnesty would bring alarge number of fearful but would-be law-abiding people back into the taxpaying fold.
He proposed an amnesty under which people would still have to pay undeclared tax, but would escape use-of-money interest and penalties.
Mr Shewan said that after earlier publicity on compliance issues he had been staggered by the extent of feedback from small business- people who recognised they were not complying with the tax laws and wanted to come clean, but were petrified about being penalised.
"No adviser can give them comfort that they won't be penalised. It forces them to go underground," he said.
With the black economy estimated at $11 billion a year, more than $3 billion a year in tax was going begging.
Mr Shewan said much of that involved people who would never comply with the Tax Act, but it also involved people who would like to own up but were deterred by the penalties and stress they would be exposing themselves to.
"If an amnesty is not on," Mr Shewan said, "how do we get them back into the tax system?"
The last tax amnesty, in 1988, was not a true amnesty, he said, because the people who came forward were still charged a late-payment penalty. Nevertheless 16,000 did and $26 million was raised in revenue.
The select committee said an amnesty could provide a way of drawing attention to the implications of not complying with the tax laws, stimulate compliance and recover tax that might otherwise never be paid.
But it was important that amnesties did not become a frequent feature of the tax system.
