We have continued to see a high level of audit activity from the IRD, in relation to property transactions and more recently with a continuation of audits of the cash economy (cafes, restaurants, takeaways and bars) and medium to large sized privately owned companies. There has been a project run in Auckland by the Manukau and Takapuna offices looking specifically at large privately owned companies and their taxation obligations.
These audits tend to be fairly surgical in that the IRD will do a risk review and then focus on maybe one or two points that are significant to the company that the IRD feels could not only warrant some further investigation, but which would likely bear some cash collection for them.
A senior IRD official recently explained to me that they now view the disputes process as a failed audit, ie the IRD has an expectation when it does an audit that it is picking up on points that it considers to be correct and has a high likelihood of winning without having to go through the disputes process. Whether that is on a negotiated settlement or by virtue of the taxpayer accepting the IRD’s position will often vary from case to case.