Like Elmer Fudd during rabbit season, the Government is hunting down businesses hiding their income through “cashies” – under-the-table cash transactions. This is nothing new of course, but the way it’s happening is set to change

The Government is seeking to give the IRD a bigger stick to whack tax dodgers with by streamlining its current ad hoc process into a permanent legislation provision aimed at payment service providers. To that end, the Government (not the IRD) has put out a discussion document on the proposed changes.

The IRD is, of course, already collecting this kind of information, but currently it has to issue a notice each and every time it wishes to collect information. These notices also expire, meaning they have to be reissued for the IRD to keep collecting info. Now, the Government is proposing a permanent legislative provision to enable it to collect datasets (a package of data relating to a particular business) from payment service providers.

So who are these providers, what will be collected, and most importantly, what will the IRD do with it?

In answer to the last question, the aim is to ensure that money passing through the till matches what is being reported in tax returns. For example, through this information the IRD expects to be able to “identify merchants who fall outside of expected cash ratios” – in other words, businesses that are reporting less cash income than might be expected. This can then lead to “targeted compliance interventions”.

The information to be collected includes:

  • Details of merchants’ transactions reported as aggregate monthly income, including:
        - Total number and value of all payments processed
        - Total number and value of all debits, credits, cash outs, reversals, and refunds
  •  Merchant unique identifier given by payment service provider
  • Merchant’s identity and contact information (physical and postal address, phone numbers)
  • If the merchant is an individual, their date of birth
  • Bank account numbers used by the merchant
  • Information about payments processed on behalf of the merchant
  • Names under which a business operates (legal name, trading name etc.)
  • Full name, business address and phone number of contact person dealing with the payment service provider

There are two important exclusions. Because the information is aggregated, no information on individual customer transactions will be collected.

Large merchants are also excluded. Currently a large merchant is defined as one whose value of payments through the payment service provider exceeds $30 million in a financial year, but the discussion paper has flagged that this is subject to review.

At the end of the day though, it’s clear that large businesses are not the target of this measure. Very much in the firing line are the smaller businesses who are using cash transactions to hide their true income. As the IRD collects more and more data, dodging the taxman will become harder and harder.