Impacts Meets Net impact objective? Option Fiscal Economic Administrative Compliance Fairness Option 1: status Does not N/A be perceived as Would require the This option does Could be perceived Perception of quo optimise inaction and increase use of Inland not impose as being unfair, if unfairness could effectiveness or non-compliance with Revenue resources additional there is a view that undermine the support the New Zealand’s tax to identify and compliance costs foreign investors integrity of the integrity of the rules more generally. investigate beyond those are not paying New Zealand tax bright-line test. compliance. already fair share of system. Does not “their experienced. tax”. impose additional compliance costs, but does not increase the effectiveness of the bright-line test and will require the use of Inland Revenue to investigate compliance. Not recommended Option 2: status May partially N/A Could be perceived increase Compliance Could be perceived Increases meet objective as inaction and administrative costs may be greater than as being unfair, if administrative quo + additional information as it could increase as it will require the under option 1, there is a view that costs without campaigns increase the with New use of additional depending on foreign investors guaranteeing an effectiveness or Zealand’s tax rules Inland Revenue whether third are not paying increase in support the more generally. resources to engage parties would be fair share of “their integrity of the in information required to provide tax”. Perception of bright-line test campaigns. Audit information to unfairness could in some resources still residential property undermine the situations. required to buyers and sellers integrity of the However, the investigate about their tax New Zealand tax effectiveness of obligations. system. the bright-line test would not be Not recommended optimised.
Option Meets objective? Impacts Net impact Fiscal Economic Administrative Compliance Fairness Option 1: status quo Does not optimise effectiveness or support the integrity of the bright-line test. N/A be perceived as inaction and increase non-compliance with New Zealand’s tax rules more generally. Would require the use of Inland Revenue resources to identify and investigate This option does not impose additional compliance costs beyond those already experienced. Could be perceived as being unfair, if there is a view that foreign investors are not paying “their fair share of tax”. Perception of unfairness could undermine the integrity of the New Zealand tax system. Does not impose additional compliance costs, but does not increase the effectiveness of the bright-line test and will require the use of Inland Revenue to investigate Not recommended Option 2: status quo + additional information campaigns May partially meet objective as it could increase the effectiveness or support the integrity of the bright-line test in some situations. However, the effectiveness of the bright-line test would not be optimised. N/A Could be perceived as inaction and increase with New Zealand’s tax rules more generally. increase administrative costs as it will require the use of additional Inland Revenue resources to engage in information campaigns. Audit resources still required to investigate Compliance may be greater than under option 1, depending on whether third parties would be required to provide information to residential property buyers and sellers about their tax obligations. Could be perceived as being unfair, if there is a view that foreign investors are not paying “their fair share of tax”. Increases administrative costs without guaranteeing an increase in compliance. Perception of unfairness could undermine the integrity of the New Zealand tax system. Not recommended compliance.
2015-ris-rlwtgstossl-bill-3.docx