Commissionerís discretion to modify due dates, timeframes or procedural requirements

New sections 6H and 6I of the Tax Administration Act 1994 (“TAA”) afford the Commissioner a temporary discretionary power to extend due dates, deadlines, time periods, timeframes or to modify procedural and administrative requirements for taxpayers affected by COVID-19.

This measure is intended to provide the Commissioner with a timely mechanism to assist taxpayers encountering practical difficulties in complying with tax obligations by circumventing the need for Orders in Council to be made.

The new sections provide the Commissioner with the ability to, at her discretion:

  • extend a due date, deadline, time period, or timeframe by, within or in relation to which:
    • a person must comply with a requirement set out in the provision;
    • a person must make an election under the provision; and
    • a person’s entitlements, rights or obligations are affected.
  • modify procedural or administrative requirements.

Commentary accompanying the new legislation notes that due dates and timeframes could relate to payment, filing, disclosure or other time-based requirements, while procedural or administrative requirements are intended to cover situations where some information or other requirement may be able to be completed using an alternative method or means, for example, modifying the nature or form of information or action required.

The Commissioner can exercise this discretion where compliance with current requirements is impossible, impractical or unreasonable, because of circumstances arising from COVID-19 or response measures to COVID-19. The discretion supplements the powers of the Commissioner under other provisions of the TAA and is intended to be used only when the appropriate outcome “is not possible or is difficult to achieve” under an existing provision.

The Commissioner is required to publish any variation to tax rules made under these provisions and to give the public notice to taxpayers as to any changes to their obligations. Taxpayers can either choose to apply the variation, or to abide by the existing rules. Taxpayers complying with an alternative set out in a variation will be treated as if they complied with the requirements set out in legislation.

The temporary power will be available between 17 March 2020 and 30 September 2021 (although this period can be extended by Order in Council).

Comment

As the COVID emergency unfolded the need for IR to be flexible in its approach to some aspects of compliance became clearer. At the same time as considering whether the broad care and management powers in sections 6 and 6A of the TAA needed to be reinterpreted to allow broader application, IR looked for an immediate “fix” for the pressure that statutory deadlines imposed on taxpayers placed in lockdown. The broader care and management issues are still be considered, but this author suggests could simply be too hard for IR to deal with – there are clearly differing views internally over whether and to what extent the care and management provisions need to be revisited.

The measures in sections 6H and 6I have been touted by Inland Revenue as “taxpayer friendly”. No doubt that is the intention behind the provisions, however, whether that is the practical reality will depend on the extent they are applied. Inland Revenue has limited resources and understandably will not be proactively considering each instance in which the discretion could be employed. Accordingly, taxpayers and advisers should draw Inland Revenue’s attention to situations where taxpayers would be assisted by the flexibility that new sections 6H and 6I allows. The provisions refer to impacts on a person or class of persons but, taken overall, they seem to be directed more to systemic issues or those where a group of taxpayers is actually or likely to be affected by the relevant deadline or time frame. That is reinforced by the fact that a variation applies generally unless it is to apply to a “particular class of person or circumstances.” An immediate example is the residence day-count test which would have had potentially catastrophic consequences for people unable to leave NZ and becoming captive tax residents as a result.

Variations must be published to provide transparency and help promote consistency for treatment of taxpayers in similar positions. The publication requirement tends to suggest that the provisions are not directed to individual cases. The legislation itself is silent as to how the Commissioner must publicise any variation. All the legislation requires is that the publication be in a manner of the Commissioner’s choosing. If the policy intention of the discretion is to be achieved, it is crucial not only that publication be broad and expedient, but that taxpayers know where to find the information. Hopefully this point is being closely considered by Inland Revenue.

© 2020, G D Clews and S J Davies

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E.  geoff.clews@taxcounsel.co.nz