Option 3: status Does not N/A Could be perceived Could increase Compliance costs Could be perceived Perception of quo + review in optimise the as inaction and administrative costs are likely to be the as being unfair, if unfairness three to four effectiveness or increase as it will require the same as option 1. there is a view that undermine the support the with New use of Inland foreign investors integrity of the years integrity of the Zealand’s tax rules. Revenue resources are not paying New Zealand tax bright-line test. to conduct a full fair share of system. Perception “their review and would tax”. of inaction could still require use of encourage further Inland Revenue non-compliance. resources to investigate Not recommended Option 4(a): Meets objective. The bright-line test is Would reduce Increases Increases be perceived Increases estimated to raise an instances of administrative costs compliance costs in as being fairer by compliance costs withholding tax on of additional $5 million with the because it requires determining New Zealand and administrative residential per annum. As option bright-line test. the implementation whether residents, if there is costs beyond the 4 has been designed as Could prevent some of a new withholding applies a view that foreign status quo, but this property made within bright-line a collection mechanism property transactions withholding tax and undertaking the investors are not is offset by reduced period by for the bright-line test, from being type, but it could withholding. Could complying with administrative it is expected that it completed, due to, for decrease required decrease their tax costs in other areas offshore persons would raise a portion of example, cash-flow audit resources over compliance costs obligations. and would improve the $5 million issues, or if some the longer term. for some sellers, integrity in the tax estimated for the sellers would in where the system, as New bright-line test. absence of a withholding is close Zealand-based withholding tax think to their income tax taxpayers could that they could evade liability. perceive the the bright-line test. measure as ensuring that foreign investors their fair “pay share of tax”. Recommended
Option 3: status quo + review in three to four years Does not optimise the effectiveness or support the integrity of the bright-line test. N/A Could be perceived as inaction and increase with New Zealand’s tax rules. Could increase administrative costs as it will require the use of Inland Revenue resources to conduct a full review and would still require use of Inland Revenue resources to investigate Compliance costs are likely to be the same as option 1. 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 undermine the integrity of the New Zealand tax system. Perception of inaction could encourage further non-compliance. Not recommended Option 4(a): withholding tax on of residential property made within bright-line period by offshore persons Meets objective. The bright-line test is estimated to raise an additional $5 million per annum. As option 4 has been designed as a collection mechanism for the bright-line test, it is expected that it would raise a portion of the $5 million estimated for the bright-line test. Would reduce instances of with the bright-line test. 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. Increases administrative costs because it requires the implementation of a new withholding tax type, but it could decrease required audit resources over the longer term. Increases compliance costs in determining whether withholding applies and undertaking the withholding. Could decrease compliance costs for some sellers, where the withholding is close to their income tax liability. be perceived as being fairer by New Zealand residents, if there is a view that foreign investors are not complying with their tax obligations. Increases compliance costs and administrative costs beyond the status quo, but this is offset by reduced administrative costs in other areas and would improve integrity in the tax system, as New Zealand-based taxpayers could perceive the measure as ensuring that foreign investors “pay their fair share of tax”. Recommended
2015-ris-rlwtgstossl-bill-3.docx