The bright-line test, a key part of both National and Labour’s strategy for addressing the housing crisis, is being flouted by as many as a third [sic] of the people who should be paying it.
[...]
An IRD submission to the Tax Working Group says that a review and audit of property sales in the 2016 tax year found just a third of sales where the bright-line test should have applied were compliant.
The IRD also noted that voluntary compliance appeared to be getting worse. It estimated that in the 2017 tax year as many as 2,625 sales that may be subject to the test had yet to file a return.
This represents a voluntary non-compliance rate of 71 percent, up from 66 percent in the previous year.
Its also a hell of a lot of crime. Not filing your required tax paperwork is an absolute liability offence, punishable by a $4,000 fine. Do it knowingly, and the fine goes up to $25,000. And doing it with the intent to avoid taxes is 5 years in jail.
IRD knows exactly who these people are, where they live, and how much they potentially owe. If they are flouting tax law, it is because IRD is letting them. Instead, they should prosecute these tax cheats. otherwise there's simply no incentive for them to fulfil their obligations.