Do Commision Only Tax Agencies Discredit The Inland Revenue

In New Zealand prior to 2000 anyone who was paying tax had to declare this at the end of the year to Inland Revenue on a form called an IR5. This was hard on those who were not very good at keeping records etc.

In 2000 New Zealand introduced the PAYE system or Pay As You Earn. The way this system worked was that tax was deducted from your employer and and paid directly to Inland Revenue before you even received this. With the new PAYE system there was no need for the IR5, thus for the regular salary and wage earners there was the personal tax summary.

As Inland Revenue now had a record sent to them monthly regarding your income and tax amount, Inland Revenue could see if you had paid the correct amount of tax for year. The personal tax summary is a form that sums up all your income, sees how much tax you have paid and compares that to how much you should of paid. If you have overpaid you are entitled to a refund and if you have underpaid you have to pay back a debt. Now the system was geared slightly to overtaxing people rather than under taxing as for most people it easy to receive a lump sum tax refund as opposed to being hit with a tax debt.

In recent years Inland Revenue has tried to update it public image and to escape the image of the tax man people imagine as a tyrannous organisation sought on stripping the public of every last cent. Despite their best efforts there are still plenty of people today who would rather not deal with Inland Revenue direct. This has spurred a market for tax agencies that check this for people and where there is a refund claim it on their behalf deducting a fee. These sites have been known to take fees of up to 29%.

But what are the effects on the Inland Revenue. On the face of it, those who take a more ignorant view towards the Inland Revenue views these companies in a Robin Hood like manner, stealing from the rich and giving to the poor. This view obviously discredits the IRD.  However, it is a little more complex than this.

However the industry should strive towards performing a middle man service. The Inland Revenue gets the benefits of the company’s good image; coupled with the fact many people think these companies are the IRD. For the industry to fully immerse in this role, however, it seems unethical that a fee should be deducted from the refund as this does little to credit the IRD, or uphold the integrity of the tax system. More logically it seems wholly possible for these companies to perform this service for free, and instead gather revenue solely from advertising considering the potential for phenomenal traffic flow. With the implication of such a model fully implemented across New Zealand, it seems that the whole integrity of the New Zealand tax system would take a step forward.

The number one complaint I come across working in the industry is people saying “The Inland Revenue are quick to tell you if you have a bill but never if you have a refund”. With a company churning out tax refunds on a full time basis it, this would attend to this complaint and be beneficial to both parties.