People who have not had to deal with Inland Revenue for years may be 'slightly' penalised if they won't at least confirm they are paying the right amount.

Taxpayers could be automatically "slightly" overcharged tax if they failed to respond to a new annual tax statement that would be delivered to them electronically, Inland Revenue has proposed.

The idea is one component of a huge overhaul of the tax system that is expected to take just under another six years to complete.

Revenue Minister Todd MClay backed the plan as a way to make sure people accurately paid their taxes, but Labour's revenue spokesman Clayton Cosgrove labelled it a "tax grab".

The tax department proposed in March that all New Zealanders would need to check and confirm an online statement to ensure they did not have income that had missed the taxman.

That would change the current situation under which many wage earners in steady jobs may not have had to have any dealings with the tax department since a rule change in the 1990s did away with the need for most people to file tax returns.

Inland Revenue expressed concern in March that some people were "cherry-picking" by filing a tax return or requesting a personal tax summary in years when they calculated they were due a tax refund, but not doing so when that might mean they had additional tax to pay on the likes of savings interest or share dividends.

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The tax department has fleshed out more details of the how the electronic statements might work in a new discussion document, saying there would be a paper alternative for those who could not use the internet.

It said the annual statements would be "pre-populated" with income and tax data Inland Revenue held on file and proposed that taxpayers would have to confirm that information was accurate, or amend it, by a deadline.

But it said it would need to consider what to do if taxpayers simply ignored the tax statements.

It said its "preferred" approach would be for it to make a "default" assessment that was likely to involve it charging "slightly" more tax than if the taxpayer checked the data and corrected any inaccuracies.

That would give Inland Revenue "a tool to address non-compliance by creating better incentives for taxpayers to respond to their pre-populated return", it said.

The alternative would be for Inland Revenue to assume that people had accepted their tax statement as an accurate record if they didn't respond, it said.

The problem with that was "no consideration may have been given by a taxpayer as to whether the pre-populated information was a complete and accurate reflection of their individual circumstances", it said.

McClay said he believed there should be processes to encourage a response from taxpayers. "Overall I think this will be more accurate and simpler for everyone. That will alleviate any possible unfairness from potential over-taxation," he said.

But Cosgrove said the idea amounted to a "tax return tax", which McClay should rule out.

"Deliberately overtaxing people is breaking new ground even for the IRD.

"Legislation is already in place to discourage people from cherry-picking income tax returns. This comes into effect next year. The new proposals will waste taxpayers' time by forcing them to file returns they don't need to," he said.

The closing date for submissions on the proposal is February 12.

Inland Revenue said the majority of submitters to its earlier, March discussion document said the department was heading in the right direction with the reforms it had proposed under wider Business Transformation programme, which will also see a massive overhaul of business tax.