WE SHOULD BE ABLE TO MAKE VOLUNTARY PAYMENTS TO IRD

I’ve often thought that our tax legislation should allow people to make voluntary payments to the Inland Revenue Department.  In other words, it should allow IRD to accept payments in excess of the taxpayer’s statutory obligation to pay tax computed in accordance with the tax law.

At present if you overpay tax the system will generally refund it automatically.

I was reminded of this issue when reading this 5 April New Zealand Herald editorial which continued the paper’s campaign for increasing tax to pay for the Canterbury earthquake.

The government has resisted this idea on the grounds that it would hit an already weak economy.  A far better approach would be to cut wasteful and poorly targeted government spending.  A huge amount of government spending falls into these categories.

The Herald reports a poll that found 40% of respondents favour a temporary tax.

Whenever I see people saying they would be happy to pay more tax, I think they should be able to go ahead and do so voluntarily. In fact I would go one step further and allow voluntary payers to indicate the broad area to which they want their money applied, eg police, welfare.

It would be fascinating to see how much additional revenue IRD would receive.  I suspect not a lot.

First, my guess is that if people want to donate money for welfare purposes, most would give it to private charitable organisations in the belief that they are often more effective than the government in such roles.

Second, I suspect that many people who tell pollsters that they favour raising taxes want them raised on other people, not themselves. 

Anyway, if the law was changed to allow voluntary payments to IRD in excess of tax assessments we would soon find out how many people (like the Herald’s editorial writer) put their money where their mouth is.  The IRD could report aggregate payments in the same way that it reports other tax revenue.  What could be the objection to such a law change?

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3 thoughts on “WE SHOULD BE ABLE TO MAKE VOLUNTARY PAYMENTS TO IRD

  1. In the unlikely event that someone actually makes a voluntary extra tax payment, maybe it could be taken into account if IRD later rules that the taxpayer owes tax.

    Even less likely than your suggestion being taken up, I suspect!

  2. This reminds me of a very good post I came across recently, on welfare, which included the following quote:

    “Ask yourself,” wrote John Fund of The Wall Street Journal, “If you had a financial windfall and wanted to help the poor, would you even think about giving time or a check to the government?”

    This part of the article is also relevant:

    The pre-eminent beneficiaries of the whole 20th century experiment in federal poverty-fighting were not those whom the programs ostensibly were intended to help. Rather, those beneficiaries were primarily two other groups:

    1. Politicians who got elected and re-elected as champions of the needy and downtrodden. Some were sincere and well-meaning. Others were cynical, ill-informed, short-sighted and opportunistic. All were deluded into traveling paths down which not a single administration of the 19th century ever ventured — the use of the public treasury for widespread handouts to the needy. …
    2. The bureaucracy — the armies of professional poverty fighters whose jobs and empires always seemed secure regardless of the actual effects of the programs they administered. Economist Walter Williams put it well when he described this as “feeding the sparrows through the horses.” Williams also famously observed, “A lot of people went to Washington (D.C.) to do good, and apparently have done very well.”

  3. Bill Faulkner, Tauranga City Councilor forever, has a voluntary rates account for all the locals that want everything to donate to. Despite his many urgings for people to put up their money for their nice to haves the fund stands still at about $300 or so. Been like that for years.

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