IRD bumbles, but with good intentions
IRD issued this Revenue Alert a few days ago. In short, it says that New Zealand business are required by law to keep their records in New Zealand. Some online accounting packages may not. It appears that Xero, the only credible product in the market, stores customer data off-shore.
The law they are talking about is the Tax Administration Act 1994, section 22.
[…] every person who carries on any business in New Zealand shall keep in New Zealand sufficient records in the English language to enable the ascertainment readily by the Commissioner [of] the assessable income derived by that person from the carrying on of that business […
Various people think it’s a stupid move by the IRD and they don’t “get” the Internet. I have sympathy for this; I’m a Xero user and I’m eager to ensure my tax compliance.
I think the IRD has a scenario like this in mind:
<IRD> Hey, you’ve been fiddling the books. Show us your records.
<Company> No way.
<IRD> No really, we’ll take you to court if you don’t.
<Company> Whatever. I use CloudAccounting Corp. Talk to them.
<IRD> Hey CloudAccountingCorp, give us the records for this company. They have been naughty.
<CloudAccountingCorp> Whatever. We’re incorporated in the Cayman islands. We don’t pay attention to your silly colonial rules.
<IRD> Fine then, we’ll get a court order that forces you to hand over the data.
<CloudAccountingCorp> The data is kept in Botswana. Good luck with that!
<IRD> Okay fine, we’re going to take the company to court for not keeping records in NZ.
It’s a very contrived situation. But I can see how some public servant bought into this scenario and reacted by warning NZ business to keep their data in this country.
I look forward to some clarity from Xero and the IRD.
