6 - The tax policy work programme – current projects
- Enhancing tax policy within broad-base, low-rate (BBLR) tax settings
- International tax and base erosion and profit shifting (BEPS)
- Business Transformation and Better Public Services
- Social policy
- Routine updates to regulations
Items marked as New were initiated after the tax policy work programme was last published in November 2016.
This list will be updated from time to time on Inland Revenue’s tax policy website at http://taxpolicy.ird.govt.nz/work-programme
Enhancing tax policy within broad-base, low-rate (BBLR) tax settings
| Project | Description | Regulatory system |
|---|---|---|
| Review of the tax framework for employee share schemes | Reforming the tax treatment of employee share schemes to ensure appropriate and balanced outcomes. | Income tax |
| Income protection insurance: a review | The Financial Services Council is seeking a review of the income tax treatment of income protection insurance. There is a lack of clarity about the tax treatment of this form of insurance and inconsistencies across products offering similar benefits. | Income tax |
| Deductibility of holding costs for revenue account property | Considering the deductibility of holding costs for property. | Income tax |
| Abusive tax position penalty | Examining the application of the abusive tax position penalty in cases of tax avoidance, and whether any changes are needed to the penalty. | Income tax |
| Demergers | Considering an exclusion from dividend taxation for corporate demergers. | Income tax |
| Petroleum mining decommissioning expenditure | Replacing the existing ability to spread back petroleum mining decommissioning expenditure to earlier tax years with a refundable tax credit in the current year. | Income tax |
| Review of bank account requirement for offshore persons’ IRD numbers | The bank account requirement for an offshore person to obtain an IRD number continues to cause issues in practice. In particular, it is an obstacle in a number of cases to people being able to comply with their tax obligations. | Income tax |
| Trust beneficiaries as settlors | There are instances when beneficiaries of trusts who leave their beneficiary income in the current accounts with the trust become inadvertent settlors. This is not in accordance with the policy intent. | Income tax |
| Financial arrangement issues | There are a variety of financial arrangement taxation issues ranging from remedial to policy enhancements to ensure these rules work as intended. | Income tax |
| Taxation of non-bank securitisation vehicles | Extending the current securitisation regime to beyond banks. | Income tax |
| Impact of case law on the “voting interest” test for corporate trustees | Considering the impact of recent case law on the application of the voting interest test in the Income Tax Act 2007 and the Goods and Services Tax Act 1985 to corporate trustees. | Income tax |
| Repeal adverse events income equalisation deposit regime | This regime is, in practice, little used, because the main scheme offers more flexibility. However, its existence can cause some confusion. | Income tax |
| Review of donee status applications | Dealing with applications by organisations for donee status under schedule 32. | Income tax |
| Treaty of Waitangi settlements | Tax implications of Treaty settlements are addressed as required. | Income tax |
| Feasibility and black hole expenditure (New) | Reviewing the rules on deductions for the costs related to undertaking feasibility studies and other possible black hole expenditures. | Income tax |
| GST on imported low value goods (New) | Working with the New Zealand Customs Service to support the development of a regime to collect GST on low value imported goods. | Consumption tax |
| Employee share schemes – deferral regime for start-up companies (New) | Design of a deferral regime, whereby start-up companies may defer the payment of tax on employee share schemes to a future point in time when the valuation and liquidity problems are not as pronounced. | Income tax |
International tax and base erosion and profit shifting (BEPS)
| Project | Description | Regulatory system |
|---|---|---|
| Hybrid instruments and entities | Consideration of foreign hybrid instruments and entities in the context of BEPS. | Income tax |
| Double tax agreement (DTA) work programme | New Zealand is seeking to establish new and updated double tax agreements with a number of countries, including Norway, China, Korea, Slovak Republic, Portugal and Fiji. | Income tax |
| Automatic exchange of information | Domestic implementation of a new global standard on the automatic exchange of financial bank account information with treaty partners. | Information sharing |
| Interest limitation rules | Consideration of New Zealand’s interest limitation rules in light of OECD recommendations. Part of the BEPS Action Plan. | Income tax |
| Multilateral instrument | As part of the BEPS work, we have signed a multilateral instrument that simultaneously amends the double tax agreements of participating countries. The amendments to DTAs will address certain aspects of the BEPS project that have a treaty dimension, for example: treaty shopping and permanent establishment avoidance. | Income tax |
| Foreign trust disclosures | Policy recommendations arising from the Government Inquiry into foreign trust disclosure requirements. | Information sharing |
| Inbound investment framework | An officials’ paper outlining New Zealand’s approach to taxing foreign investment income has been prepared. It has been used as the basis for targeted consultation with private sector representatives, and has also been published on the tax policy website to facilitate a wide understanding of the trade-offs the Government faces in responding to BEPS. | Income tax |
Business Transformation and Better Public Services
Business Transformation
| Project | Description | Regulatory system |
|---|---|---|
| Better administration of GST and PAYE | Policy options to reduce compliance and administrative costs consistent with longer term business transformation thinking. | Income tax Consumption tax |
| Review of the Tax Administration Act | Developing a framework for tax administration with an emphasis on the key roles of the Commissioner, taxpayers and tax agents, as well as the rules around information collection and tax secrecy which underpin their interactions. | All regulatory systems |
| Individuals’ taxation | Improving the tax system for individuals, including comprehensive pre-population of income information, collection of information, more efficient debt collection processes and the degree of interaction with the tax system. | Income tax |
| Business taxation | Improving the tax system for business, including the calculation of provisional tax, the collection of information and reviewing the penalties and interest rules. Includes researching additional measures that have potential to deliver further benefits to businesses, reduce compliance costs and make the tax system simpler. | Income tax |
| Investment income information | Streamlining the collection of information about investment income such as interest, dividends, PIE income and Māori authority distributions. | Income tax |
| BT social policy | Improving the social policy system for individuals and families, including alignment of definitions, reviewing assessment periods to improve accuracy and timeliness of payments, more efficient debt collection and prevention processes, and improving outcomes for customers with special or exceptional circumstances. | All social policy regulatory systems |
Better Public Services
| Project | Description | Regulatory system |
|---|---|---|
| Information sharing agreement between Ministry of Social Development and Inland Revenue | Information sharing with Ministry of Social Development to assist in determining entitlements to benefits, social assistance and other services. | Information sharing |
| Information sharing between MBIE, the Companies Office and Inland Revenue (New) | Information sharing between MBIE, the Companies Office and Inland Revenue. | Information sharing |
Social policy
| Project | Description | Regulatory system |
|---|---|---|
| Financial Assistance for Live Organ Donors Bill 2015 | Inland Revenue consulted by Ministry of Health on aspects that impact on Tax Acts, for example: child support, Working for Families, student loans, KiwiSaver, information sharing, and whether income replacement for donors proposed under the Bill should be treated as income for tax purposes. | All regulatory systems |
| Encouraging student loan repayments and addressing debt of overseas-based borrowers in the PEN group | Overseas-based student loan borrowers known as the “Penalty (PEN) Group” have overdue amounts growing faster than the rate at which borrowers in this group are becoming compliant. This is due to the compounding effect of late payment penalties (under the 1992 Act) and late payment interest. Ministers are interested in any further measures that could be developed to address the overdue debt of this group and the wider student loan borrower population. | Student loans |
| Student loans – interest exemption | Budget 2016 announced the International Connections for New Zealanders package, which extends student loan interest write-offs to borrowers studying overseas who are recipients of Government-funded scholarships. | Student loans |
| KiwiSaver (New) | A range of reforms reflecting recently announced changes to New Zealand Superannuation and Retirement Commissioner’s recent recommendations. | KiwiSaver |
Routine updates to regulations
| Regulation | Description | Frequency |
|---|---|---|
| Taxation (Use of Money Interest Rates) Regulations 1998 | Sets the rates of interest payable on underpayments and overpayments of tax. | As needed |
| Income Tax (Fringe Benefit Tax, Interest on Loans) Regulation 1995 | Sets the prescribed interest rate that is use to determine if a fringe benefit exists in relation to an employment related loan. If the interest rate increases, the new rate applies from the commencement of the next quarter. If the interest rate decreases, the new rate applies from the commencement of the quarter in which the rate decreases. | Quarterly |
| Income Tax (Family Tax Credit) Regulations | Increases the amount of the family tax credit. | As needed – if the percentage movement in the CPI is 5% or more |
| Income Tax (Minimum Family Tax Credit) Regulations | Increases the family tax credit threshold in section ME 1(3) of the Income Tax Act 2007. The credit ensures families do not suffer a reduction of income when moving off a welfare benefit into 30 hours or more of unpaid work. | Annually |
| Income Tax (In-Work Tax Credit) Regulations | Increases the amount of the in-work payment amount. The amount is only increased as a result of a review of the amount by the Minister of Revenue in consultation with the Minister of Social Development. Changes are made by Order in Council if the Minister makes a policy decision to do so. | Every three years (the first review was undertaken in 2008) |
| Income Tax (Adverse Event Income Equalisation Scheme Rate of Interest) Regulation | Sets the interest rate that is to be paid on deposits to the adverse events income equalisation scheme. | As needed |
| Income Tax (Deemed Rate of Return, 20XX–20XX Income Year) Regulations | Sets the deemed rate of return under the foreign investment fund (FIF) rules. The deemed rate of return is based on an average of the five-year government stock rates prevailing at the end of each quarter throughout the income year and adding a margin of 4%. | Annual |
| Income Tax (Payroll Subsidy) Regulations 2006 | Provides for the amount of the subsidy and the calculation of the payroll subsidy to be paid to PAYE intermediaries. | As needed |
| SILNA (Conservation Payments) Regulations | Provides for payments of money made in consideration of entering into a conservation covenant over specified Maori land (SILNA land) is not gross income of the recipient. | Irregularly – as requested |
| Student Loan Scheme (Charitable Organisations) Regulation 2006 | Allows charitable organisations to be listed for the purposes of the Student Loan Scheme Act. Under that Act, a student loan borrower who was personally absent from New Zealand because he or she was working as a volunteer or for token payment for a charitable organisation named in the regulations may be granted an exemption by the Commissioner of Inland Revenue entitling that borrower to a full interest write-off. | As needed |
| Student Loan Scheme (Repayment Threshold) Regulations | Sets the income threshold at which borrowers are required to commence making repayment obligations. | Annually |
| Student Loan Scheme (Repayment Obligations of Overseas-based Borrowers) Regulations | Sets the level of loan balance at which overseas-based borrowers must make repayments. | As needed |
| Student Loan Scheme (Establishment Fee) Regulations | Sets the amount of the student loan establishment fee that is charged to a borrower each time the borrower enters into a loan contract after 31 March 2012. | As needed |
| Student Loan Scheme (Annual Administration Fee) Regulations | Sets the amount of the annual administration fee charged if a borrower has a consolidated loan balance of $20 or over (note: not charged if a student loan establishment fee is charged in that tax year). | As needed |
| Student Loan Scheme (Late Payment Interest Threshold) Regulations | Sets the threshold for when late payment interest is charged (currently $334 and over). | As needed |
| The Commissioner may charge taxpayers the service fee associated with using credit or debit cards to make payments | The service fee is currently 1.42% of the amount paid, plus GST if any. The amount of the service fee can be changed by Order in Council. | As needed |
| Taxation (Direct Credit Refund) Regulations | Specify a tax refund type must be made by direct credit to a bank account nominated by the taxpayer entitled to a refund. | As needed |