Super-rich tax probes net $500m

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New Zealand's richest people have paid more than $500 million in extra tax after an Inland Revenue crackdown.

IRD investigators have unravelled the complex tax affairs of individuals who have, or control, more than $50 million each, to ensure they pay their fair share of tax.

New Zealand has 250 "high-wealth individuals" who made their fortunes from property development, investment, retail, agriculture, tourism and manufacturing.

They have 7500 associated entities - such as companies and trusts - which can be used to avoid paying tax. One had a web of 197 entities.

"Aggressive tax arrangements can include the use of tax havens, transferring profits to associated offshore entities, using trusts to divert taxable income, and showing lifestyle and luxury assets as business assets," said IRD investigations manager Stuart Duff.

"The integrity of the tax system relies on people being assured that everyone pays their fair share. Inland Revenue wants to ensure high-wealth individuals are paying their fair share of tax on time, every time."

While the IRD would not give an estimate of the extra tax collected so far in the year that will end on June 30, it is expected the sum will increase the total collected over 10 years to more than $500 million.

Since the unit was set up in 2003, it has collected $467 million.

Other cases still under investigation total $158 million, and a further $130 million is disputed.

Mr Duff said the IRD focus on the high-wealth group was encouraging them to understand their tax obligations and meet them.

"In most cases they do register, file and pay on time, but the complex nature of their business structures and entities means accurate reporting can be an issue."

Arrangements designed to reduce tax are not necessarily illegal.

But in cases where the IRD decides they are designed for tax avoidance, penalties can be imposed.

As well as scrutinising the rich, the tax department is also turning its attention to the family trusts of thousands of other New Zealanders.

It aims to foil people who pay themselves low salaries through their own companies and use family trusts to hide wealth.

Some people have deliberately reduced their salaries so they can qualify for welfare payments.

The Law Commission, which is reviewing trust laws, found the number of family trusts rose from 146,000 in 2001 to at least 237,000 in 2010.

The IRD also plans to target the "hidden economy" of online auctions and garage sales. This programme is expected to bring in an extra $350 million in tax over four years.

Targeting the wealthy

* 2003 - $27m
* 2004 - $13m
* 2005 - $36m
* 2006 - $23m
* 2007 - $32m
* 2008 - $103m
* 2009 - $83m
* 2010 - $87m
* 2011 - $63m
* Total $467m (expected to exceed $500 million by 30 June 2012 )

250 high-wealth individuals each worth more than $50 million
7500 entities associated with these individuals
$158m under investigation and another $130 million in dispute

Source: IRD