The Wiki o te Tāke; Trust, cryptos and hidden income


Earlier this week, the International Federation of Accountants, in cooperation with the Chartered Accountants of Australia and New Zealand (CAANZ) and the Association of Chartered Certified Accountants, Posted the third edition of the study on public confidence in taxation. This is an international study of 8,000 people in G20 countries and New Zealand. These people were asked about the people they trusted in the tax world.

This is the first time that this survey has been carried out since 2018 and it contains some really interesting results. People continue to have the highest level of trust in professional tax accountants – 55% trust them very much, professional tax lawyers reaching 50% and NGOs 37%.

One of the most interesting and very encouraging findings around the world is that confidence in government tax authorities has improved from 2.7% net to 14.9%, almost six times more. But that said, you’re still quite divided on this point, as you might expect, with 43% saying they trust or very trust the tax authorities, while 22% say we are suspicious of tax authorities. ‘them or that we are very suspicious of them. Politicians still have work to do because they have a net mistrust of 22.8%.

Regarding the media, and this is quite relevant as there is quite a bit of debate going on around media reporting at the moment, has a net positive of 0.1%, but 41.9% of mistrust or high distrust of social media. The lowest level of trust was in New Zealand where only 13.4% of respondents trusted social media.

Today, across the G20 as a whole, 48% of the population is satisfied with the ease and efficiency of their dealings with tax authorities, down slightly from 2018. But people strongly support the use of tax incentives to support sectors affected by Covid-19, with overall support of 66% for this. There is also support for tax incentives aimed at targeting so-called global megatrends, such as climate change and an aging population.

However, this is really very interesting because it seems contradictory, 49% support the use of tax incentives to attract multinational companies. However, support for international tax collaboration has declined in 15 of the 20 countries sampled since 2018. And here in New Zealand, support for incentives to attract multinationals was lowest. New Zealanders saw it as very unimportant, with just 21% supporting the incentives.

New Zealanders were also the least likely to believe in the importance of intergovernmental competition in tax matters, which was also the position in 2018 during the last survey. New Zealanders were also more inclined than most other countries to require multinationals to disclose tax information on a country-by-country basis.

And this is where there has been a big change, as in 2018, 12 of the countries in the sample said tax information should be made public. But in this current investigation, only six countries, including New Zealand, supported it, with the main change being that information should be made available to authorities but not publicly.

Inland Revenue will be very encouraged that when asked about the lightest tax filing processes New Zealand comes out on top with 81.8% of respondents stating that they spent less than a week per year. And New Zealanders also rated the Inland Revenue highly in overall fairness of the process and in interaction with tax authorities. Again, this is a good job for Inland Revenue. And, of course, that will have started to factor in the impact of Inland Revenue’s business transformation program.

So it’s a pretty interesting poll overall. I think what catches my attention is this kind of changing mood around multinationals and international cooperation. And I think tax authorities need to pay more attention to the fact that the public is probably not really aware of the extent of information sharing. Reading between the lines here, there is a bit of uneasiness about this.

But the fact that people also prefer tax incentives to attract multinationals is also quite interesting to see, as these trade-offs mean that there are trade-offs for overall revenues. But obviously the belief is that more multinationals mean higher tax revenues. New Zealanders, however, seem to be very skeptical about this. And that’s probably because we’re not one of the 20 largest countries in the world, so the issue of multinational investment and its benefits is rather grayer for New Zealand than it might be. ‘be in other countries.

Cryptos and taxation

Subsequently, the Finance and Expenditure Committee announced an investigation into the current and future impact and risks of the nature of cryptocurrencies and called for submissions last month. These submissions are now available to the public. They received nearly 270 from various people, including one by Satoshi Nakamoto, which is apparently quite important in the crypto world. (Assuming it’s him).

The Reserve Bank drew attention to his submission where he was really very skeptical of the cryptocurrency’s future value and, in fact, made a few references to their potential involvement in tax evasion.

PricewaterhouseCoopers and the Chartered Accountants Australia and New Zealand also provided comments, and the Chartered Accountants Australia and New Zealand submission definitely worth reading. It was submitted a few days before the news Draft Taxation Law (annual rates for 2021-2022, GST and corrective measures) was published, which actually addressed some of these issues.

In its summary, CAANZ said that taxation of cryptocurrency in New Zealand remains problematic and

Taxation of cryptocurrency in New Zealand remains problematic. There is significant inconsistency in the application of current tax rules and the government’s legislative response has been light. We believe that a comprehensive framework is necessary.

CAANZ’s submission is actually a nice little detail of the current state of cryptocurrency tax treatment and the Inland Revenue guidelines that have been released.

The submission says it seems reasonable to remove cryptocurrency from the GST rules, but when it comes to the rules on financial arrangements, she thinks it’s not as clear as you might think. CAANZ believes that there are both advantages and disadvantages to making this change, depending on the nature of the document and the specific circumstances of the taxpayer.

What he sums up is that there needs to be a comprehensive framework that allows cryptocurrency to fit into existing tax rules. This is necessary to provide simplicity and clarity and reduce compliance costs, because as CAANZ rightly points out, existing tax rules are generally well understood and can be applied to existing and new general cryptocurrency guidance. . And I think that’s where Inland Revenue is trying to go. But he is moving cautiously on this point.

CAANZ asked its 600 members if they own cryptoassets themselves, if their clients do, and if so, have they sought advice? They received a response from about 300 people, many of whom expressed concerns about the time and costs involved in keeping accurate and detailed records. And they believed that important taxpayer education was needed because they felt the rules weren’t clear and people didn’t understand the rules as well as they should. An education campaign was therefore needed.

Interesting stuff there. And without a doubt, we’ll likely see more submissions from CAANZ on the new tax bill.

Hidden foreign income

Across the divide, the Australian Tax Office has issued an alert on what is called hidden foreign income. What worries him is that people misrepresent foreign income as a gift or loan from a related foreign entity, such as a family member, friend or related corporation or trust.

Essentially, this is to say that all taxpayers who willfully omit foreign income, conceal their interests in foreign assets, or make bogus claims for deductions in their tax returns, will face heavy penalties, including possible penalties. criminal. Now, the ATO Alert also sets out guidelines on how to document genuine gifts or loans from related entities abroad when the funds are not being used for income-generating purposes.

Now this is interesting because often where the ATO goes, the Inland Revenue will follow. And at the moment, we know that the Inland Revenue is working diligently on the information it receives as part of the Common Reporting Standard Automatic Exchange of Information which should cover foreign income. But it’s one of those areas that I and other colleagues see all the time – people have income overseas and aren’t entirely clear about their obligations in relation to this.

In most cases, they report it in the jurisdiction in which the assets are located, but do not report it here because there is this idea that double taxation means that if it is taxed there it will not be. therefore not imposed here. So, deceiving people of this misconception is something that we are constantly working on. And again, it’s also a matter of perhaps more guidance from the Inland Revenue allied to an education campaign.

Covid assistance update

And finally, just a little reminder that applications for the third round of the wage subsidy open last Thursday and are open until 11:59 p.m. on September 30.

What you need to keep in mind here is that if you miss any of these grant rounds, that’s it. No retrospective request is allowed. And I’ve seen a couple of instances where people didn’t realize it and missed the opportunity to claim a wage subsidy. So be vigilant. We can see more in this space. The resurgence aid payment is still available and, as I mentioned last week, more cycles could be ahead.

That’s all for today. I am Terry Baucher. And you can find this podcast on my site, www.baucher.tax or wherever you get your podcasts. Thanks for listening and please give me your feedback and tell your friends and customers. In the meantime, kia pai te rā, have a nice day!


The Week In TaxIFAC Report on Public Confidence in G20 Tax Systems, FEC Cryptocurrency Investigation and More

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