Action by Inland Revenue - sharing account and data details overseas/ on social media

16 Oct 2024

Proactive action is taken by Inland Revenue to unilaterally provide New Zealand account details to foreign tax authorities and to publish taxpayer data with social media platforms.

Recent examples include:

A colleague at Baker Tilly Staples Rodway, accountants, contacted us about a New Zealander living in France who had been contacted by the Finance Publiques regarding the non-declaration of his New Zealand bank accounts. It transpires that Inland Revenue had informed the Finance Publiques about the New Zealand bank accounts pursuant to the OECD’s Common Reporting Standard (CRS).

This is the likely outcome for the client in France:

• Disclosure for the last 10 years will be required.
• Penalties and taxation of presumed earnings will apply[1]. We understand that:
  • A prescribed fine of €1,500 will apply for each year and for each undeclared account. We note that the €1,500 fine is a favourable fine due to New Zealand having a suitable treaty in place with France; if no such treaty existed, the fine would increase to €10,000 for each undeclared account.
  • Taxation of presumed earnings plus a 40% surcharge will apply.
  • Accounts that should have been disclosed in France include all bank accounts in which rights are held (including funds held jointly or with a third party (such as in a lawyer’s trust account) or accounts over which signing powers are held), life insurance policies and digital assets.
  • There will be no concessions available and the compliance procedures will be extensive.

Inland Revenue has featured in the media recently regarding its practice to share hundreds of thousands of taxpayers’ information with social media platforms. This practice was used in order to reach and target customers who needed encouragement to be tax compliant. Hashed details of a significant number of New Zealanders were provided to social media platforms including Google, Facebook, Instagram and LinkedIn in order to match information held by those platforms. Those being targeted included businesses, taxpayers claiming Working for Families credits and people with student loan debt. The practice has come under criticism from foreign regulators and concerns about privacy have been raised. Inland Revenue has currently paused its use of Custom Audience Lists[2] on social media pending reviews. Irrespective of the outcome, the approach being taken demonstrates the active approach that Inland Revenue is taking to recover unpaid taxes. For our New Caledonian and French Polynesian clients, we are aware that many clients have selected the Authorised Issuer Levy (AIL) to apply to their New Zealand bank account investments due to the 2% rate that applies.

However, the AIL is a disbursement and it is not a tax, which has implications for foreign obligations. For example, in New Caledonia, we understand that if foreign sourced income is subject to a personal tax on the foreign income[3], it might be exempt from tax in New Caledonia but as the AIL is not a personal tax, no such exemption applies to the New Zealand bank interest. New Caledonian residents are therefore required to declare 100% of their New Zealand bank interest in New Caledonia. As New Caledonia is a signatory to the CRS, it can be presumed that Inland Revenue will share details of bank accounts held by New Caledonians with the New Caledonian tax authorities.

If you or someone you know has New Zealand assets or is thinking about moving overseas, it is important to understand the foreign compliance and taxes that apply. One country will have ultimate taxation rights over worldwide income and assets. Don’t hesitate to contact me if assistance is needed.

[1] https://www.impots.gouv.fr/international-particulier/questions/declaring-foreign-bank-accounts-and-life-insurance-policies-held

[2] https://www.ird.govt.nz/about-us/social-media/about-custom-audience-lists#:~:text=What%20is%20a%20custom%20audience,have%20returns%20or%20debt%20due.

[3] https://dsf.gouv.nc/node/749