Chapter 1 – Introduction
The discussion document Towards a New Tax Administration Act, released in November 2015, emphasised the importance of the tax system in supporting the Government’s better public services objective, which is a key contributor to building a more competitive and productive economy. It was also noted that, under the Business Transformation programme, the Tax Administration Act, in addition to prescribing and supporting the Commissioner of Inland Revenue’s care and management role, needs to continue to ensure that the right incentives are in place to maximise compliance with the tax laws.
One objective of this discussion document is to firm up the Government’s proposals in Towards a New Tax Administration Act having regard to the submissions received. In doing this, the framework for considering the issues continues to be based on the five dimensions for the new Tax Administration Act: the role of the Commissioner, the role of taxpayers, the role of tax intermediaries, information collection and confidentiality.
Two common themes emerged from the submissions:
- There is a need for the Commissioner to have some greater flexibility in the application of the law but this should not be at the expense of transparency in her decision-making.
- The need for greater information-sharing within government was understood, but this should not be detrimental to taxpayers’ rights to privacy and confidentiality.
This document details the Government’s legislative proposals for a wider application of the Commissioner’s care and management function, and more relevant information-sharing and confidentiality rules. The proposal to extend care and management reflects the need for the Commissioner to be more responsive to the needs of taxpayers as suggested by the new compliance model. The information-sharing proposals are predominantly about clarifying Inland Revenue’s role in cross-government sharing, given the vast amount of information Inland Revenue holds – both taxpayer-specific and non-specific – in the context of the Government’s Better Public Services objective.
Towards a new Tax Administration Act also highlighted the important but changing role of tax agents or intermediaries in ensuring taxpayers’ ongoing compliance with our tax laws. This document proposes specific law changes that would better enable a wider group of intermediaries than at present to access the new service offerings provided by Inland Revenue’s Business Transformation, while protecting the integrity of the tax system.
The Tax Administration Act 1994 (“TAA”) centres on the rights and obligations of taxpayers, including the records that need to be kept, providing information, interpreting the law and reconciling any different interpretation by Inland Revenue, assessing and amending liabilities, paying and filing on time, and penalties arising from default.
All of these rights and obligations, many of which are highly interconnected, need to be considered against the administrative framework provided by the compliance model, the opportunities offered by Inland Revenue’s new system and third-party business software providers, and Inland Revenue’s future organisational design. Chapter 4 of this document considers this very broad topic and related policy questions. Specific proposals are set out in the key areas of amending assessments and binding advice.
Tax information and confidentiality
- Narrow the coverage of the confidentiality rule to information that would identify a taxpayer.
- Retain an ability for the Commissioner to withhold certain non-taxpayer-specific information in order to protect revenue collection.
- Clearly set out the broad categories of exceptions to the new taxpayer confidentiality rule.
- Provide a legislative framework for sharing Inland Revenue information with other agencies for the provision of public services that:
- offers greater flexibility through the use of regulations to authorise sharing
- sets out a cohesive set of principles governing when sharing regulations will be appropriate
- provides greater, and more consistent, transparency regarding how Inland Revenue information is shared.
- Allow information to be shared for public services without need for regulations when the taxpayer concerned has consented.
- Retain the obligation on Inland Revenue officers to keep information confidential.
- Clarify how the confidentiality rule applies to people who receive Inland Revenue information.
- Clarify the penalty for improper disclosure.
- Include a new provision in the TAA that empowers the making of regulations governing the repeat collection of external datasets and provides transparency regarding such collection.
- Clarify that information collected for one particular function can be used for any other function of Inland Revenue.
Getting it right from the start
- Move to a situation where more of Inland Revenue’s resources are focused on helping taxpayers get it right from the start. The proposal is aimed at giving the right level of certainty for a taxpayer at the best stage, subject to Inland Revenue’s resource constraints. The specific proposals being considered include:
- significantly reducing the fees for obtaining a binding ruling, at least for small and medium-sized enterprises
- allowing post-assessment binding rulings
- expanding the scope of the rulings regime.
- Expand the current approach to minor errors.
The role of tax intermediaries in the transformed administration
- Amend the statutory tax agent definition to include those who are in the business of acting on behalf of taxpayers in relation to their tax affairs for a fee or who prepare tax returns on behalf of their employer. This would extend to PAYE and GST filers.
- Clarify in the TAA the persons who are eligible for an extension of time, based on whether they prepare income tax returns for 10 or more taxpayers.
- Provide a new discretion for the Commissioner to choose not to recognise a person as another taxpayer’s nominated person if doing so would adversely affect the integrity of the tax system.
Role of the Commissioner and design of a new Tax Administration Act
- Extend the care and management provision to allow the Commissioner some greater administrative flexibility in limited circumstances.
- Allow a greater use of regulations for tax administration, including for:
- a more tailored approach to different types of taxpayers
- trials of tax administration processes.
- Amend the structure of the TAA to reflect the modernised tax administration, including basing the Act around core provisions.
- Move to a more hierarchical approach to drafting the TAA, including a greater use of broader principles when appropriate.
You are invited to make a submission on the proposed reforms and points raised in this discussion document. You can make a submission:
by email to: [email protected] with “Proposals for modernising the Tax Administration Act” in the subject line
By post, addressed to:
Proposals for modernising the Tax Administration Act
C/- Deputy Commissioner, Policy and Strategy
Inland Revenue Department
PO Box 2198
The closing date for submissions is 24 February 2017.
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.