Option 4(b): Maximises collect a greater Would significantly Substantially Increases Likely to be Substantially withholding tax compliance with portion of estimated reduce instances of increases compliance costs as perceived as fair to increases on all sales of and supports the bright-line revenue non-compliance. administrative withholding agents the extent that it administration and integrity of the than option 4(a) Could prevent some and may not be will be required to correctly withholds compliance costs residential – property subject bright-line test, possibly close to the property transactions possible for Inland withhold on all tax. Likely to be relative to status to bright-line test but does not $5m bright-line from being Revenue to bright-line perceived as unfair quo. While it optimise the estimate completed, due to, for implement prior to transactions. This if it withholds tax would maximise effectiveness of example, cash-flow relevant phase of its will result in in situations where compliance with the rules. issues, or if some Business in a there is no the bright-line test, sellers would in Transformation greater number of underlying tax the additional absence of a Programme. circumstances, liability. administrative and withholding tax think which would result compliance costs that they could evade in higher relative to option the bright-line test. compliance costs. 4(a) would not be justified by the expected marginal increase in Not recommended
Option 4(b): withholding tax on all sales of residential property subject to bright-line test Maximises compliance with and supports the integrity of the bright-line test, but does not optimise the effectiveness of the rules. collect a greater portion of estimated bright-line revenue than option 4(a) – possibly close to the $5m bright-line estimate Would significantly reduce instances of non-compliance. Could prevent some property transactions from being completed, due to, for example, cash-flow issues, or if some sellers would in absence of a withholding tax think that they could evade the bright-line test. Substantially increases administrative and may not be possible for Inland Revenue to implement prior to relevant phase of its Business Transformation Programme. Increases compliance costs as withholding agents will be required to withhold on all bright-line transactions. This will result in in a greater number of circumstances, which would result in higher compliance costs. Likely to be perceived as fair to the extent that it correctly withholds tax. Likely to be perceived as unfair if it withholds tax in situations where there is no underlying tax liability. Substantially increases administration and compliance costs relative to status quo. While it would maximise compliance with the bright-line test, the additional administrative and compliance costs relative to option 4(a) would not be justified by the expected marginal increase in Not recommended