IRD Issuing Deduction Notices

June 16, 2009 New Zealand Taxation  No comments

The Inland Revenue Department is issuing some deduction notices to client’s of businesses, according to Kerryn Downey of McGrath Nicol.

According to Kerryn Downey of McGrath Nicol, the Inland Revenue Department (IRD) has used deduction notices on at least two businesses in the last six month, in response to their un-payment of tax obligations. In effect, these notices order the receiving business to direct their payments to the IRD as opposed to the target supplier, in order to for the money to be used to pay for the supplier’s tax obligation. According to Kerryn Downey of McGrath Nicol, the issued deduction notice’s have since been withdrawn.

The IRD’s power to do this is nested in section 157 of the Tax Administration Act. Equivalent provisions exist for the collection of GST. Opponents to the deduction notices, like Kerryn Downey, argue that the use of this power could result in businesses being put into receivership.