Address to the Employers and Manufacturers Association annual payroll conference
Rendezvous Hotel, Auckland
9.15am, Thursday 17 March 2011
Good morning and thank you for inviting me to be here with you today.
I was pleased to see that this is now your fourteenth annual payroll conference.
Congratulations on sustaining your conference through the very significant changes to payroll processes that we have witnessed in recent times.
Many of those changes relate to the Inland Revenue Department.
Things such as the advent of Employer Monthly Schedules, ir-file, KiwiSaver, Payroll Giving and last year’s tax rate cuts have all changed the landscape for payroll practitioners over recent years.
Yet through all this, a central function remains – deductions are made and paid to Inland Revenue and salaries and wages are paid to employees.
This happens efficiently and flawlessly for the most part and this, of course, is crucial as our economy depends on that.
Some of how you do that is set to be changed.
For the better, I hasten to add.
I would like to talk to you today about changes the Government is considering which I think should smooth the process greatly for both businesses and individuals.
But our immediate concern of course is Christchurch’s recovery and I would like to first extend my sincere sympathies to all who lost family, friends and colleagues in the disastrous earthquake of February 22.
The response to the earthquake has been swift and remarkably well-considered, with everyone doing their bit within their particular area.
I would like to commend the EMA for the very practical and helpful advice and efforts you are putting in to helping small businesses, in particular, get back on their feet.
People around New Zealand have been incredibly generous, offering all manner of financial and other forms of support.
Of particular relevance to you is that employees can choose to make donations to the Christchurch Earthquake Appeal through the Payroll Giving scheme.
Payroll Giving, as you would know, allows people to donate direct from their pay to their chosen charity and receive an immediate tax credit for payroll donations.
The latest figures show that since Payroll Giving’s introduction in January last year, $1.6 million has been donated through the scheme and a total of 650 employers have offered payroll giving to their employees.
I am pleased that a group of large organisations have joined together to form an “early adopters group” to champion payroll giving.
The group is focussed on the question of “how to design and implement a standalone payroll giving scheme”.
At least a couple of you will represent members of the group’s payroll systems.
If you are interested in finding out more about the early adopters group and the role that you can play, I would encourage you to contact the chair of the early adopters group, Diana Crossan, who you no doubt all know better in her role as the Retirement Commissioner.
You can contact her at: [email protected]
You can also learn more about payroll giving by visiting Inland Revenue’s website www.ird.govt.nz
Payroll giving is a simple and easy way for people to support the Christchurch relief and recovery effort.
Inland Revenue, too, is doing its bit by working to ensure smooth processes, appropriate tax relief and the facilitating of the raising of funds for relief and recovery.
To date, my policy officials have been involved in working with the Ministry of Social Development on the Government assistance package that provides the earthquake support subsidy for employers and the earthquake job loss cover for employees.
They also worked to ensure that Inland Revenue’s powers to remit interest are appropriate.
This work resulted in three Orders in Council.
The Department will waive penalties and interest if returns cannot be filed or payments made because of the earthquake.
Now my officials are focusing on a wider range of other matters.
Taxpayers have raised a number of issues and in some areas urgent legislative changes may be necessary.
These issues include:
- statutory dates
- the treatment of donated goods
- the redundancy tax credit that expires on 1 April this year.
- the tax treatment of welfare benefits provided by employers (including ex gratia payments).
The government is currently working its way through all these issues, and I am hopeful more definite announcements can be made in the next couple of weeks.
Meanwhile, those people expecting payments from Inland Revenue, such as Working for Families Tax Credits, will continue to receive those as usual.
As I said before, we all do what we can to help, and Inland Revenue is doing what it can to smooth processes.
Smoothing processes is something that the Government and Inland Revenue have developed a particular interest in.
Making Tax Easier
In fact, in the middle of last year, a discussion paper called Making Tax Easier was issued and an online consultation undertaken, seeking feedback on various proposals to improve the tax system.
A prime focus of Making Tax Easier was the intention to place more reliance on web-based tax administration.
On the whole, submitters supported the vision set out in the consultation, particularly the intention to improve interfaces and processes, but it would be fair to say that they expressed clear reservations about making electronic technology and communications mandatory.
Overall, we are committed to moving to an ‘e’ environment for tax administration over time, but we will ensure we do that in a way which builds and maintains the support of the community.
Good progress has been made on the proposals and I would like to update you on that now.
Using accounting software for routine tax compliance
A founding principle of the Making Tax Easier discussion document was the will to make tax compliance easier and, whenever possible, cheaper for businesses.
A key innovation proposed in that consultation was the integration of tax functionality into business's accounting software.
This would, for example, enable routine tax compliance tasks like the filing of the Employer Monthly Schedule to be handled automatically by a business's payroll software.
Rather than businesses having to take information from their systems and put it either into a paper form or into a separate Inland Revenue system, the payroll accounting system will be able to send the information directly to Inland Revenue.
Both businesses and software developers responded to these proposals very enthusiastically.
Since then, work has been going on at two levels.
Inland Revenue has also been looking at its own systems, and discussing with the Government the changes it will need to make to support this new way of working.
Inland Revenue has also been working very closely with a group of representatives of the software development industry, to work out how these ideas may work in practice.
I want to acknowledge the efforts and commitment of the software developers group and am pleased to announce that next month, Inland Revenue will be providing secure access, via third party software, to key account information.
This will allow tax agents to view their clients’ tax data from within their software.
Over time, Inland Revenue will expand the information available.
This new service will be a first step towards a full business to business system in future.
It is just one example of Inland Revenue working with the private sector to reduce compliance costs for business.
Because this is an important change which will bring significant benefit to the business sector, it is important that we get it right, and Ministers are watching developments with great interest.
Improved online services for individuals
One of the other key issues raised in the Making Tax Easier consultation was the difficulty some people face interacting with Inland Revenue.
Think of all the things you can do today from your home computer: you can research travel destinations and hotels, book and pay for a flight, order groceries, buy and sell things on auctions sites like TradeMe and all manner of other transactions.
Until recently, one thing you have not been able to do is arrange your tax affairs.
Much interaction with the tax system still takes place through pieces of paper being sent back and forth.
While this works well for some, it is a failure to take advantage of internet technology.
However this is changing and I have been really encouraged by the progress Inland Revenue has made in this area.
The new Online Services facility was launched in May last year, and further refined in September.
People who sign up for this can carry out almost all of their transactions with Inland Revenue and look at balances, check on due dates and keep their contact details up to date.
This covers not just tax but all the other things people deal with Inland Revenue for, like Child Support, KiwiSaver, and GST.
As employers, this should reduce the number of staff who contact you for information about their transactions with Inland Revenue.
I am especially pleased that inroads are being made into the huge mounds of paper that Inland Revenue has in the past generated in its correspondence.
People can now choose to send and receive email on their tax affairs through a special secure environment.
This is not too dissimilar to a system that some banks operate.
Many of us choose email for all manner of correspondence.
Now you can also use it for managing your tax affairs.
I would encourage any of you who haven't used Inland Revenue's Online Services to try them out – I think you will be impressed with what you find there.
Cross-agency information sharing
This is another proposal which was raised in the Making Tax Easier consultation.
It is a complex issue.
On the one hand, there is clearly value for individuals in having all of the government agencies that provide services know about something which affects them and where a response from government would help.
An example we always used to give of this was the birth of a child, but the recent tragic events in Christchurch are another example of where the ability to share information about a change in someone's circumstances would help government to provide a swift and comprehensive response.
There are also clearly advantages to government in sharing this kind of information.
Quite simply, doing so enables it to avoid the situation we have now where several different computer systems are maintained to keep the same basic information about someone.
This information is not necessarily complex or sophisticated. It may be as simple as their address.
On the other hand – and this was something that came out of the public consultation – people are concerned about their privacy not being protected and potential misuse of information about them.
These are important concerns and they must be addressed properly at all times.
Legislation to allow greater information sharing by Inland Revenue was introduced in the Taxation (Tax Administration and Remedial Matters) Bill in November last year.
The bill proposes greater sharing of information held by Inland Revenue with other government agencies, but subject to a range of restrictions:
- the government agency seeking the information must have the ability and authority to collect it in its own right
- the information must already be information that is collected by Inland Revenue
- information will only be shared if it is not so sensitive that it would inhibit individuals from providing accurate information in the future
- it must be either economically inefficient for the agency seeking information to collect it itself, or clear compliance benefits to individuals for the information to be shared rather than collected separately.
The bill is currently being considered by the Finance and Expenditure Select Committee and I expect that it will be enacted later this year.
Having said all this, although we have made some small steps, business transformation is no easy task.
And transforming tax administration is even more complex.
While designing new services and communications, the integrity of the tax system must at all costs be protected.
A great deal rides on the confidence that businesses and individual taxpayers have in the security of their tax information.
That confidence underpins a system that people work with and see as fundamentally fair, which is the case here in New Zealand.
And any system that Inland Revenue adopts must be simple, attractive to taxpayers, secure and must not impose undue compliance costs.
It requires a long term programme, but the end goal is the same, that is, to make compliance faster, easier and less costly for taxpayers.
To provide innovative online services and help Inland Revenue respond more quickly to future changes while maintaining the integrity of the tax system.
In closing, there always seems to be something new happening in the world of payroll.
In recent times, changes have added to your payroll processes.
What I have sketched out today is a broad outline of what Government is focusing on with a view to smoothing processes when dealing with Inland Revenue.
The Government’s priorities are focused firmly on setting the New Zealand economy on its feet again and making it stronger than before.
The changes I have outlined are part of the economic strategy.
An efficient tax system does not stifle enterprise with undue compliance costs and therefore seeks to minimise its compliance burden on taxpayers and businesses.
By Government doing its bit to improve its own efficiency and remove impediments, we help lift productivity in the private sector.
Thank you and I hope you have an enjoyable conference.
Mark Stewart | Press Secretary | Office of Hon Peter Dunne
DDI +64 4 817 6985 | Mb +64 21 243 6985