The New Zealand Law Society would welcome a different approach by Inland Revenue to penalties if it would mean changes in some of the current approaches.

In its comments on the discussion document Making Tax Simpler: Towards a New Tax Administration Act, the Law Society says the document looks at a new compliance model based on the view that taxpayer behaviour arises from a combination of capability, opportunity and motivation.

The document then flags the possibility that the new model could mean a different approach to penalties in future.

The Law Society points to some results which would be welcomed from such a change in approach.

These would include less frequent imposition of shortfall penalties for failing to take an acceptable tax position where the taxpayer has obtained professional advice before taking the disputed tax position.

The Law Society says it would also welcome "a reversal of the trend of Inland Revenue imposing and then only agreeing to reduce shortfall penalties in settling a dispute if the taxpayer pays all of the core tax and use of money interest assessed (without any willingness to settle for less than core tax and without any remission of interest)."

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