IRD chasing trade me dealers

Posted June 27th, 2010 by Dr James Pratt

Hundreds of online traders are under scrutiny from the tax department as part of a nationwide e-commerce crackdown which has already netted the government an additional $1.26 million in taxes.

Inland Revenue warned last year it planned to crack down on people selling goods on auction websites such as Trade Me because businesses had complained it was unfair that they were GST-registered and paying tax while many online traders were not, meaning they could not compete fairly.

Trade Me, New Zealand's largest online auction website, runs about 60 million auctions each year, collectively worth hundreds of millions of dollars. The bulk of the auctions are run by individuals looking to get rid of unwanted goods, but commercial businesses also use the site to sell their goods - without always paying their share of tax.

The penalties for not paying tax range from fines to lengthy imprisonment.

Inland Revenue investigations manager Jonathan Matthews said during the past year the department had completed more than 100 compliance reviews and a similar number were currently under way.

Compliance reviews involved IRD staff contacting people about their online trading activity and identifying areas where they might need to make a voluntary disclosure or adjustment to information they have already filed with the tax department.

"In the vast majority of cases, the compliance message is getting through and customers have recognised the need to return income from online trading," Matthews said.

"However, some people have not complied with their obligations and we've taken action to address this.

"In addition to compliance reviews, we have completed a further 51 investigations resulting in approximately $1.26m in additional tax," he said.

A further 26 investigations were pending and the compliance activity was continuing.

Matthews said the department had a range of remedies available to it when considering if a shortfall penalty should be imposed on online traders who flouted their tax obligations, and to date the department had opted against taking any prosecutions.

"But that isn't to say we won't use prosecution in the future."

Matthews said the department received yearly data about online trading transactions and planned further awareness, education and audit activity as it identified those traders who have undeclared income.

For anyone concerned about meeting their tax obligations on Trade Me, a flow chart of questions is available on the site which lets buyers and sellers determine whether they are liable for tax.

Source:

www.ird.govt.nz

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