The definition of "Tax Agent"

2007 amendment gives IR a discretion to withhold recognition or remove a person as a tax agent in order to protect the integrity of the tax system.

Sections 3, 34B, 37(4B) and 81(4)(lc) of the Tax Administration Act 1994

The amendment gives Inland Revenue a discretion to withhold recognition or remove a person as a tax agent when the action is necessary to protect the integrity of the tax system.

Background

Before this amendment, provided a person met the limited criteria required, Inland Revenue could not refuse to register a person as a tax agent even if, for example, that person had a long record of non-compliance in their own tax affairs or those of their clients, or they had been convicted of offences involving serious dishonesty.

The amendments will allow Inland Revenue to withhold recognition of, or remove, a person as a tax agent when the action is necessary to protect the integrity of the tax system.

Key features

New rules governing who can be a tax agent have been introduced. New section 34B of the Tax Administration Act 1994 gives Inland Revenue a discretion to withhold recognition or remove a person as a tax agent when the action is necessary to protect the integrity of the tax system.

Operational guidelines will set out the circumstances in which the discretion might be exercised. It is envisaged that the discretion not to grant, or to remove, tax agent status will be exercised only in a very small number of cases. Potential factors that might be taken into account, while not necessarily definitive, include:

  • whether a person has been found guilty of an offence or breach by the disciplinary body of a professional organisation of which they are a member - for example, the New Zealand Institute of Chartered Accountants;
  • whether the person is an undischarged bankrupt or an insolvent entity;
  • whether the person has been convicted of a crime involving dishonesty (within the meaning of section 2(1) of the Crimes Act 1961) and has been sentenced for that crime within the last seven years;
  • whether the person is prohibited from being a director or promoter of a company, or taken part in the management of a company under sections 382, 383 or 385 of the Companies Act 1993;
  • whether the person has been convicted of an offence under the Tax Administration Act 1994; and
  • the person's compliance history- including both their own tax affairs and their level of compliance as an agent.

Under the amendments, Inland Revenue is required to give a tax agent notice of the intention to revoke the agent's status and give reasons for the intended revocation. The agent will be given a 30-day period (or a shorter period if Inland Revenue is concerned that there is a substantial risk to the revenue and a longer period if it is appropriate in the circumstances) in which to resolve the matters raised in the notice of intended revocation. If the agent does not resolve the matters to the satisfaction of Inland Revenue, the agency status will be revoked and the agent and taxpayers linked to that agent advised accordingly. If, because of a revocation of tax agency status, a taxpayer fails to meet a filing deadline, the legislation allows for an extension to the deadline so that penalties are not imposed.

Entities can be recognised as tax agents along with individuals, provided that the entity supplies Inland Revenue with the names of:

  • each person having the duties of tax manager, chief financial officer, chief executive officer or director if the entity is a body corporate other than a closely held company;
  • each shareholder if the entity is a closely held company;
  • each partner if the entity is a partnership; and
  • each member if the entity is an unincorporated body.

The information is necessary to enable the Commissioner to be satisfied on an ongoing basis that, given the involvement of these individuals, it is consistent with protection of the integrity of the tax system for the entity to have agency status. Individual agents currently recognised by Inland Revenue as tax agents are not required to reapply for their agency status. Entities currently listed will continue to be listed as tax agents provided they supply Inland Revenue with the above information by December 2008. When introduced, the amendment required that Inland Revenue be notified of any changes within three months. This period has been extended to 12 months.

Inland Revenue's secrecy provisions have been amended so that information relevant to a decision to remove a person as an agent can be provided to professional bodies (for example, the New Zealand Institute of Chartered Accountants).

Application date

The amendment applies from 19 December 2007 (the date of enactment).