Thousands of Businesses Cannot Pay Their Taxes
July 23, 2010 New Zealand Taxation
Nearly 30 000 New Zealand companies have had to make arrangements with the Inland Revenue Department, claiming that the recession has affected their ability to meet their tax obligations.
Throughout the previous financial year, the Inland Revenue Department (IRD) and 29 520 New Zealand businesses have made installment-payment agreements for NZD 546 million worth of unpaid taxes. A similar negative effect on tax payments is expected to continue throughout the current fiscal year, according to the IRD’s latest annual Compliance Focus report, released on July 23rd.
Bob Russell, Commissioner for Inland Revenue, stated that the IRD anticipated the current number of businesses requiring tax payment arrangements, due to the economic downturn. Many of the suffering businesses have not previously experienced a serious economic recession, and are subsequently unaware of the tax laws surrounding businesses losses. However, Bob Russell added that in the IRD’s experience, some of the businesses claiming to be in financial difficulty are actually artificially inflating their losses or understating their reported incomes. Subsequently, the IRD is intending to increase its compliance monitoring measures, and pay closer scrutiny to payment arrangement applications.
The IRD will soon endeavor to educate business owners regarding tax filing, calculation and declaration mistakes commonly seen among struggling companies, such as mismatches between losses brought forward and losses available. Additionally, businesses with significant or suspicious tax loses will undergo additional investigations.
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