IRD hot on heels of tax dodgers
If the house always wins, then the taxman isn’t far behind – at least not during the last year.
Inland Revenue won outright almost 85 per cent of litigation it was in over the 12 months to June 30 – its highest rate of success since at least 2010.
It is also well above IRD’s target of winning 66 per cent of the cases it brings against taxpayers, or others bring against it.
Inland Revenue, in its latest annual report, said it won 83.3 per cent of the judgments involving it over the year.
The tax department has only included judgments in this strike rate if all the issues being decided by a court or the Taxation Review Authority came back in its favour.
It is higher than the 77 per cent success rate the IRD enjoyed in the 2012-13 year and the 68.6 per cent rate during the 2011-12 period.
This year’s figure is also up on the 75.5 per cent of outright wins Inland Revenue recorded in 2010-11.
Over the past four years, the IRD has consistently boxed above its own targets.
Asked why the IRD believes it would only succeed in two-thirds of cases, a spokesperson said that litigation was not without risk.
“Inland Revenue needs to take the right cases for the right reasons,” the spokesperson said.
The IRD’s success rate does not take into account whether or not the department is awarded costs.
In the Taxation Review Authority, for instance, the parties pay their own costs.
“Where appropriate, the Commissioner [of Inland Revenue] will seek costs awards in successful judgments,” the IRD spokesperson said.
EY partner Joanna Doolan said the IRD’s success rate was “somewhat distorted” by the nature of cases being taken, which included those against the likes of John George Russell.
The IRD in June won a judgment for $367 million against Russell, who developed a template that the Court of Appeal called a “blatant tax-avoidance scheme”.
“The social conscience around tax has moved dramatically in the last 10 years,” Doolan said.
“A lot of the cases taken [by IRD] are about transactions that happened at least five years ago and what we’re seeing in the success rate is a reflection of a change of public mood being judged or imposed on past transactions,” she said.