Chapter 7 - Removing legislative barriers to delivering digital services

New Zealand’s tax administration system is underpinned by the Tax Administration Act 1994. Rules that govern the obligations and entitlements of customers are detailed in a body of legislation collectively known as the Inland Revenue Acts.

Much of this legislation predates the widespread use of digital services. It is important that the legislation does not inhibit the development of digital services and that it is sufficiently flexible to accommodate the continued evolution of technology and services. This chapter looks at the Inland Revenue Acts and includes some proposals to remove barriers to establishing digital services.

INLAND REVENUE ACTS

The Inland Revenue Acts set out the obligations that customers and Inland Revenue must meet, including for the provision of information and returns. There are three categories of requirement dealing with how communication/interaction should be made:

• those that are silent on how the engagement should be made; (see Appendix 2, example 1);
• those that give the Commissioner a discretion on how the engagement should be made (see Appendix 2, example 2); and
• those where the specific form of engagement is prescribed in legislation (see Appendix 2, example 3).

No legislative change is needed for the first two categories.

In the third category set out above, provisions which, for example, require information to be provided “in writing”, or “by post” (see Appendix 3) would appear to prevent the move to digital services.

The Electronic Transactions Act 2002 can override these rules, if, effectively, both parties to the transaction consent. This would enable the Electronic Transactions Act to potentially override even specific requirements in tax legislation.

While the Electronic Transactions Act would allow tax communication to move to digital services even in light of express requirements for non- digital services, this would conflict with the important principle of tax legislation being as simple and clear as possible.

The Electronic Transactions Act would also not deal with situations where the Commissioner has decided that certain customers should be required to use digital services.

TIMING RULES

The Tax Administration Act 1994 sets out a range of rules by which various returns must be received, payments made, and other things must be completed. These rules were typically designed to deal with paper-based transaction systems. These timing rules would need to be reviewed to ensure that the requirements for the use of digital services are clear, and that there are no inadvertent timing benefits to customers in using non- digital compared with digital services.

PROPOSALS

The Inland Revenue Acts should be reviewed and provisions requiring non-digital communication removed to allow potential future use of digital services.

Timing rules should be reviewed to ensure that rules for digital services are clear and align with non-digital services.