Making Tax Simpler
Better Digital Services: A Government Discussion Document
Proposal
To use digital technology to transform the way
individuals and businesses interact with Inland
Revenue, allowing them more time to live their lives
and grow their businesses
Comment
 The objective is sound, sensible and good for New Zealand
 The digital age is already here and being embraced by many New Zealanders as a way to do
business
 Most taxpayers would say the sooner the better, but others will require time and support to
adapt
 Appropriate incentives will be needed to encourage some taxpayers to move to digital
 Tax law is complex and, even in a world of simpler tax administration, individuals and
businesses will need advice and support
 The goal must be a win/win for Government and taxpayers, resulting in reduced
administration and compliance costs
 The project must not shift compliance costs from IR to businesses and intermediaries such
as employers and agents
 Project should be future-proofed as much as possible – much more will be possible after this
first step
 Full consideration must also be given to:
o Privacy
o Security
o Flexibility
o Reliability
o Certainty
 Change process must be transparent and incremental; not insidious. No surprises. Any
changes must be explicit and subject to full consultation
 Inland Revenue field resources must be retained and fully briefed – they are vital to the
project’s success
 IR must continue to devote resources to tax policy and admin BAU as BT project develops
 If done right, the project will save time and cost for all New Zealanders
To ensure the digital services meet everyone’s needs
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To integrate tax into accounting software (starting
with PAYE)
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Will encourage higher rates of compliance if straightforward and easily understood
Machine to machine is appropriate for routine transactions, but the need for human
interaction will continue for interpretation and verification
Service from IR’s agent account managers/ community compliance officers still needed
Discussion document is very focused on individuals and SMEs – also needs to consider large
businesses and micro businesses
Large businesses:
- Do not generally calculate tax in their accounting system (it is primarily used for
management reporting)
- Use other systems or bespoke software for tax
- IR system needs to be able to interact with this software, or the taxpayer may need
access to IR system directly
- Types of interaction and systems required will vary across business size, location and
industry – e.g. banking, insurance, manufacturing, forestry – solutions may need to be
tailored for different groups
- Online form filling will not assist large corporates – they will calculate the tax separately
and manually complete the form
- Large businesses with overseas parents may have global or regional financial systems
(including for payroll) which will increase complexity so any changes required will need a
long lead time and it may be that some functionality is simply not possible
Micro businesses:
- Unsophisticated accounting and systems
- Near enough is good enough” - a level of materiality is sensible
- Need accessible information and education
- Will need personal assistance the first time and, in some instances, on ongoing basis
There will still be an ongoing need for review of systems/data to ensure it is correct; and a
process for correction where it is not
Error correction process must be considered at the outset – it will be very different under a
system of “real time” information; PIE rules are a good example
Penalties must also be reconsidered – faster and more frequent information flow to IR
means higher risk of errors – penalties not always appropriate
To introduce “Digital by default”
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Consult early and widely with all software providers
Certification process should be open (no limit on number of providers) and transparent
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Trust is critical – the system must be reliable, accurate and secure. Many taxpayers who
have not yet adopted digital have not done so because their level of trust in the system is
low.
Changes need to be incremental and well-signalled. A “big bang” approach could
compromise trust.
Start with more straightforward regimes to build trust in new systems and in change process
Errors must be easy to correct and penalties should not be imposed for those making a
genuine effort to comply. Assistance to comply should be given more emphasis.
Type of digital interaction will vary with type of taxpayer
Will still need option of human interaction for all taxpayers
Human interaction will remain default for:
o A taxpayer with complex tax affairs
o Taxpayers who need education and assistance on entry into the tax system and, in
some cases, on an ongoing basis
The system must include the functionality to allow taxpayers to save and print their tax
information and returns filed digitally; most will want this
Individuals will still need contact from IR if returns are pre-populated; it is unlikely they will
be familiar enough with the tax rules to initiate contact, and probably will not make a
concerted effort to find out unless they believe they are due a refund
We continue to believe that tax returns should also include a series of questions to ascertain
whether there are any items missing from income or from the return. In the case of
individuals, any digitised return could ask a series of yes/no questions about specific items
e.g. have you disposed of any land? Do you own any foreign property or investments? A
digitised return could provide links to specific IR guidance on the relevant topic or
transaction.
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To support those who cannot or cannot easily move
to digital
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Resources will be needed at a variety of levels – digital natives will not need the same type
of assistance as those who are new to it
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To encourage agents and employers to become
digital
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To remove legislative barriers to digital – e.g. where
transactions currently cannot be carried out digitally
To align timing rules for digital and non-digital
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Assistance provided via website but will also need to provide human assistance e.g. call
centres, face to face contact (could be done via community groups, libraries, CAB)
Both channels (digital and paper filing) should remain open for as long as is needed to
ensure near full take-up of digital channel
IR call centre should be open outside standard business hours – many small business owners
take care of their tax compliance in their evenings and weekends
Cut-off period must be consulted on and well communicated
Intermediaries, including agents, will be a critical part of the transition and critical to the
ongoing success of Business Transformation
Do not move costs of tax collection to intermediaries or compensate for additional cost
Pace at which agents’ business models change will increase so they will need support
Agents should not be bypassed; digital will not be able to replace agent involvement (and
businesses would not wish this); agent role will continue to evolve
Agents must be given options as to how they wish to interact with their clients and how
their clients wish to interact with IR – e.g. some clients may wish to have access to account
information and make payments themselves; others will prefer these to be done by agents
IR must commit to additional service and support for those groups
No one size fits all for agents either – IR should create a differentiated model for interaction
with agents based on performance / size / market segment/ needs
Agents will be able to facilitate change – IR should consider how best to encourage agents
and employers e.g. provide benefits for a group of “trusted agents” and/or “super users”
This is overdue – currently many barriers to becoming electronic even for those who would
like to – e.g. requiring separate paper-based elections to be filed at time of return –
uncertainty with postal delivery times leads some taxpayers to file both the election and the
return in hard copy
IR should accept files sent digitally e.g. pdf attachments to returns
Remove current issues with moving to digital – e.g. statute bar/IR 10
Review record-keeping requirements in the GST Act and Tax Administration Act
Commenced with removal of timing advantage for cheque payments and should continue