New Zealand is losing millions of dollars of taxes to the ‘hidden economy’ because Revenue Minister Stuart Nash has taken his eye off the ball, National’s Revenue spokesperson Andrew Bayly says.
“In the hidden economy, work, services and business transactions occur under the radar – undeclared activity for which taxes should be paid but are not. No one knows just how much it is actually worth but experts have estimated it’s between $9 billion and $26 billion.
“Inland Revenue (IR) collected $77.9 billion worth of tax in 2019 but experts estimate that in respect of the country’s self-employed alone, it is losing at least $1 billion in tax on unreported income.
“IR has been so focused on dealing with problems created after it introduced the third stage of its business transformation computer upgrade in April that it’s actually costing the country money now.
“The third stage of the upgrade rolled out in April has led to a huge number of enquiries as people have sought to clarify their personal tax affairs. As a result staff have been diverted from other areas IR should be policing, including the hidden economy.
“The number of IR staff working on investigations of undeclared income fell from 200 in 2015-16 to 143 this year. Tax recouped from investigations from $152 million to $108 million.
“Mr Nash should be making sure the Government gets the full amount due in any given tax year. If we’re losing revenue the Government has to either generate more income or it has to put up taxes. No one wants that.
“Our tax system is based on everyone paying their fair share but the amount of money being recovered from the hidden economy is small. A good Minister would be ensuring this is sorted out immediately.”