Currently, most information provided to the IRD is confidential and is not able to be shared with third parties, including other Government departments. This means that in the event the IRD investigates a taxpayer and uncovers evidence of illegal activities, under current law this information cannot be shared with the police.
Under recently enacted legislation, the IRD has entered into an information sharing agreement with the police that came into effect from August 2014. The IRD and the police will be able to share personal information for the prevention, detection, investigation of, or use as evidence of, a serious crime. A serious offence is defined as a crime punishable by more than four years in jail, such as burglary and money laundering.
The IRD haven’t entered into this agreement lightly; as the concepts of confidentiality and “tax secrecy” underpin the public perception of the integrity of the tax system. As a result, information can only be shared when it relates to ‘serious crime’, consequently the police will not have access to the vast majority of information stored by the IRD.
According to the Police Minister, Hon. Anne Tolley, the agreement will help the police tackle drug manufacturing and distribution, money laundering and organised crime. The role of tax authorities in the prosecution of serious criminals is not without precedent. Possibly the most well-known case is that of Al Capone, the infamous Chicago mobster. Although Capone’s exploits were widely known, the police were never able to find sufficient evidence to convict him. Capone was eventually jailed for tax evasion, following an investigation by the US Internal Revenue Service.
It’s a little known fact, but the proceeds from illegal activities are generally required to be returned as income and subject to tax. There may not be a large number of drug dealers and money launderers that comply with their income tax obligations by dutifully including their ill-gotten gains as “other income” in their tax returns. However, during the process of an investigation, or as a result of information received from other taxpayers (or the criminal themselves), the IRD will from time to time possess information that will be useful to the police.
The agreement does not mean the IRD will broaden its crime fighting efforts beyond that of tax evasion, nor does it mean that everyone’s financial information is accessible by the police. But it may result in a few more “bad guys” having to face the music.