MPs to look into IRD's methods of collecting

By Mary Jane Boland

Members of Parliament will discuss tax collection methods next week as scrutiny escalates over the Inland Revenue's tough approach.

The finance and expenditure select committee will discuss the IRD at a closed meeting in Wellington on Wednesday.

The meeting follows an outcry this week after a Kapiti Coast woman, Bronwyn Mutton, said her husband had committed suicide because of tax department pressures.

An Inland Revenue spokesman said the department had not been asked to the meeting, but it would be happy to attend.

Lawyers and accountants said yesterday that they sympathised with Mrs Mutton's case because the IRD had taken a tough approach since stiff non-payment penalties came in in April 1997.

Some also suggested that the department's deficiencies, perceived during the Winebox inquiry, were another reason for the harder line. In the past, people who did not pay their tax on time were charged an additional 10 per cent penalty of the bill, which compounded every six months.

Now people are charged 5 per cent of the bill if they pay a day late. That fee compounds at a rate of 2 per cent each month and people must also pay a use-of-money rate of 12.48 per cent - three times the wholesale interest rate.

One man pushing for an external inquiry into the IRD, John Shewan, said yesterday that 60 people had phoned him with horrific tales about the IRD since hearing of the Mutton tragedy.

One case involved the friend of a man in debt who offered to pay the department $50,000 off the debt, but it refused. The man subsequently went into voluntary bankruptcy and his marriage ended.

Mr Shewan, a tax partner at PricewaterhouseCoopers, said such cases showed the department was not fulfilling its legal obligations to recover as much tax as possible.

Other tax experts said the department's methods were not as bad as they seemed.

Ross Stitt, a tax partner at law firm Chapman Tripp, said he knew there were "areas where individual IRD officers can be over-zealous in the way they carry out an investigation and the way they impose penalties."

But he said such cases were isolated and he did not agree that the IRD was "a rapacious organisation trying to bankrupt all the people."

A tax partner at Ernst & Young, Gordon Trainer, said any investigation should look at interest rates and penalty charges rather than focusing on how staff handled cases.

Mr Trainer said it seemed strange that creditors were paid 4.79 per cent interest by the IRD when debtors had to pay a range of penalties, including the 12.48 per cent use-of-money charge.

The Inland Revenue general manager of operations, Peter Barrand, said taxpayers could go to the Ombudsman with a complaint if they wanted to.

He would not give an analysis of the complaints received but said IRD always told people who made a request under the Official Information Act that they had the right to go to the Ombudsman.

He said the department had had an increase in the number of Official Information Act requests in recent years and would expect the number of complaints to increase proportionally.