At a glance

The Government intends to modernise New Zealand’s tax administration. The world is changing, with huge improvements in ways of doing business. What was acceptable 10 or 20 years ago no longer meets the demands of customers today.

Inland Revenue not only collects revenue but also administers a number of social policy programmes.

The tax system is important for New Zealand. It helps fund a wide range of government functions such as healthcare, welfare, education, infrastructure, police, border control, emergency response, and many other services.

To protect the Government’s ability to keep providing these services, it is important that our tax system keeps pace with change. The tax system should be simple and make it easy for people to get right, but difficult to get wrong. It should be fair and support high levels of overall compliance. Improvements should ensure that businesses spend less time on tax and more time on running their business, supporting Government’s wider goal to build a more competitive and productive economy. Costs to customers of complying and to the Government of administering the tax system, should be kept to a minimum.

This document aims to introduce you to the broad direction the Government intends to take to improve the administration of the tax system. Your views on that direction are important. The ideas in this Green paper are in the early stages of development and will be subject to more detailed consultation in the coming years.

WHAT CUSTOMERS THINK

In June 2014, in conjunction with the Treasury and Victoria University, Inland Revenue hosted a conference entitled, Tax Administration for the 21st century.

The conference’s purpose was to explore options for making tax easier (by reducing both compliance and administration costs) and increasing voluntary compliance balanced against core tax policy objectives such as raising revenue, and ensuring fairness and efficiency.

The main points made by attendees at the conference were:

  • giving people the ability to self-manage their tax affairs with more speed and predictability but with access to the right staff at the right time with the necessary skills to provide certainty to taxpayers. In other words, Inland Revenue should use new technology to allow more focus on high-value services to taxpayers, to help them manage their tax affairs;
  • the need to consider policy and legislative settings (and not merely current business processes) to rethink how tax administration can be improved. It is more than just digitising existing processes and replacing an aging information technology system. Anything within the tax administration system should be up for consideration;
  • the importance of involving businesses, other customers, third parties and advisors in the design of the rules and processes that underpin tax administration. The tax administration system has to work for all New Zealanders;
  • the cost of change needs to be closely considered and managed to ensure that it is not merely shifting costs from Inland Revenue to businesses and other customers or vice versa. There has to be an overall net benefit to society through a real reduction of compliance and administrative costs; and
  • ensuring that there is continued maintenance of the tax system while modernising tax administration;

RESPONSE TO FEEDBACK

After reviewing feedback, the Government is proposing to modernise the way Inland Revenue administers the tax system over a period of years, with particular focus on making better use of digital services for transactions with Inland Revenue. Over the coming years the main emphasis will likely be on the improvements set out on the next page.

IMPROVING TAX ADMINISTRATION FOR:

Employers and businesses by

  • streamlining the collection of PAYE and GST and other withholding taxes such as resident withholding tax and related information to integrate these obligations into business processes;
  • investigating options for simplifying the calculation of provisional tax;
  • helping smaller businesses get their tax affairs and systems correct, right from the start; and
  • Inland Revenue being able to focus more resources on high-value tasks, such as providing faster and more predictable views on the application of tax laws.

What it could mean for employers and businesses

  • Tax compliance costs would be reduced, in particular for small and medium enterprises.
  • Speed and predictability for businesses in their tax affairs, making compliance easier.
  • Making tax obligations part of the normal day-to-day business processes, making it harder to get things wrong.
  • Simplified calculations for provisional tax – based more on real-time information (for example, when using approved accounting software) – together with payment options that better reflect taxpayers’ cash flows.

Find out more on pages 21 to 29

Individuals by

  • providing online income tax statements already filled out with your income details (pre-populating) so for the majority all that would be required would be to check and confirm income details, or correct them; and
  • more effective use of technology to better manage both overpayments (refunds) and underpayments (debts) of tax.

What it could mean for individuals

  • You would be able to quickly and easily manage your tax obligations online.
  • Refunds would be made quickly and automatically based on better use of data.
  • Any outstanding tax debts would be recovered automatically over time, where appropriate.

Find out more on page 32

Social policy customers by

  • designing processes that work for the customer and are fit for purpose;
  • using pre-populated information that Inland Revenue or government already holds; and
  • providing for timely payments on a more real-time basis, resulting in certainty for individuals and families.

What it could mean for you

  • Faster, more accurate information.
  • Less chance of going into debt.
  • Correct entitlements, reflecting your changing circumstances.

Find out more on page 34

HOW TO USE THIS DOCUMENT

The Government invites submissions on whether the potential changes indicated would likely achieve the intended outcomes for customers. This section provided a very brief overview of the issues and the policy ideas. Your views are welcome on any aspect of these potential changes.

You can:

  • make a submission based on what has been covered in this section; or
  • go directly to the section of this document that interests you to read further detail then make your submission; or
  • read the entire document and then make a submission.

HOW TO MAKE A SUBMISSION

You can make a submission:

Making Tax Simpler
C/- Deputy Commissioner,
Policy and Strategy
Inland Revenue Department
PO Box 2198
Wellington 6140

The closing date for submissions is 29 May 2015.

Submissions may be the subject of a request under the Official Information Act 1982, which may result in their release. The withholding of particular submissions, or parts thereof, on the grounds of privacy, or commercial sensitivity, or for any other reason, will be determined in accordance with that Act. Those making a submission who consider that there is any part of it that should properly be withheld under the Act should clearly indicate this.

WHAT THE POTENTIAL CHANGES COULD MEAN FOR YOU

BUSINESS INDIVIDUALS SOCIAL POLICY CUSTOMERS
e.g. Child Support and Working for Families
Simpler PAYE and provisional tax Pre-populated returns
Automatic refunds
Automatic withholding to repay tax debts
Pre-populating information
Payments calculated in real-time
Lower compliance costs
Tax processes integrated
into business processes
Quick and easy tax processes
Faster refunds
Less tax debt
Less need to provide information
Right amount paid at right time – less debt & credit
PAGE 21
APPENDIX 2, 3
PAGE 32
APPENDIX 4, 5
PAGE 34
APPENDIX 5,6