Archive of Speeches and Presentations
Inland Revenue = more than just tax
20 April 2006
Address by David Butler at the Seventh International Tax Administration Conference
In November last year 83% of Inland Revenue New Zealand's 5200 people voluntarily took part in an organisation wide "Engagement Survey". This is our highest ever response rate for an employee opinion survey with more than four thousand five hundred of our people taking the time to have their say about how Inland Revenue is going. Over 40% of people completed the survey on the day it was released!
The engagement survey was our fifth annual employee opinion survey. The previous four were "Climate Surveys" designed to measure staff satisfaction by asking our people what you think of the organisation and their employment. This year we asked our people what do you get out of the organisation and how 'engaging' is the Inland Revenue environment.
Our previous climate surveys showed that in several areas we were in the top 5% of organisations in the survey group. What was particularly pleasing was this included being in the top group for employee alignment with direction and values.
The results of this first engagement survey, which benchmarks Inland Revenue against 332organisations worldwide and which includes some of the best organisations in the world, are positive and encouraging.
The survey showed that we also compare well with the 26 Public Administration organisations around the world (against which our results were also benchmarked).
The results show that we have relatively few "disengaged" employees with a healthy number of fully engaged and the majority in the "middle". I see this as a positive base to build upon.
The majority of people told us we are very good at a number of things. More importantly however and as we expected there are also areas where we need to improve.
What's going well?
- Providing career progression and training and development opportunities
- Providing materials and equipment needed to carry out roles
- Being kept informed about changes in the work place
- Providing high service levels to our customers
What can be improved?
- Providing recognition to our people
- Setting clear expectations around work
- Taking action as a result of the survey
You may ask why it is important to have engaged people in the organisation. Clearly, the quality of our interactions with our customers is influenced by our relationships with our people. Getting the people issues right means better business results and higher levels of productivity are achieved. In other words our ability to support and enhance the skills, energy and commitment of our people is critical to our success.
Inland Revenue New Zealand is a successful organisation with growing responsibilities. We play a critical role in improving the economic and social wellbeing of all New Zealanders. We have (just a few weeks ago) successfully implemented two key election promises announced during the election campaign in the latter part of last year.
We regularly survey our customers to measure how well we are delivering our services. Despite our growing customer base and the increasing complexity of our work, we have for some years now maintained a consistently high standard of customer satisfaction.
Overall customer satisfaction with our service to the year ended 30 June 2005 was 85%. The results from our call centres were even higher, with 86% overall satisfaction and 96% satisfaction among tax agents.
This has been achieved in a time when the economy has grown rapidly with corresponding increases in customer numbers.
In recent years we have been given a number of additional key social support responsibilities by government - Working for Families, Paid Parental Leave and a new retirement income regime "Kiwi Saver". As we continue to respond to these increasing expectations from government and society, our systems and our people need to be more agile and responsive. This is increasingly important because as our customer base becomes more diverse through the expansion of our role consequently our relationships with tax and social policy customers become more complex. Like many other countries the "tax department" in New Zealand is becoming "more involved" in the lives of most New Zealanders.
Why it is important for Inland Revenue to be successful ...
Among other things that Bill Clinton will be remembered for is this quote:
"It's the economy stupid!"
For Inland Revenue "It's the money stupid!"
Inland Revenue collects 85% of the funding Government requires for community programmes and we administer several key social support programmes. For example Inland Revenue now pays out more than half of the $1 billion income support paid to New Zealanders annually and we collected $309 million (net) child support in the year to 30 June 2005. We also manage the collection of Student Loan borrowings which amounted to $510 million last year.
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Inland Revenue:
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Key Results for the year ended 30 June 2005; Inland Revenue:
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In order to give our people greater certainty about what is important and how they should go about their work as recently as two weeks ago we released a new five year business plan.
Called Our Way Forward this business plan describes how we plan to build on our existing strengths and how we plan to position our organisation for the future from 2006 to 2011.
Our Way Forward also describes our future aspirations, we call this...
Our Desired Future
Our aspirations:
- Inland Revenue is responsive in meeting the changing and increasing expectations of government and society.
- We make it easy for customers to get it right and hard to get it wrong.
- Society has confidence that appropriate action will be taken against customers who do not comply.
- Increasingly, paying tax is seen as contributing to society.
- We are professional, approachable, effective and efficient.
There are four areas I want to talk about today which will assist us in achieving Our Desired Future and they are:
- Process for developing robust policy outcomes
- Establishing and maintaining good relationships with customers and key stakeholders
- Employing passionate and engaged people equipped with the right tools and skills
- Operating a technologically smart and effective organisation.
Process for developing robust policy outcomes
- Turning first to the process for developing robust policy outcomes I want to talk a little about the New Zealand tax system, our policy role and policy development in New Zealand.
The New Zealand tax system is fundamentally sound and highly regarded internationally. The good health of our tax system and the administration of it are shown by strong revenue flows and high levels of public confidence in the department.
Improved perception of Inland Revenue as an organisation is evidenced by positive media comment. In our most recent quarterly media evaluation 92% of articles were either positive or balanced and 8% were negative. (This evaluation is conducted by an independent external organisation and covers the period 1 October to 31 December 2005.)
Despite having a well designed system there is always the need for ongoing change. There are also a number of international pressures emerging which present risk to our tax base.
As I mentioned a moment ago we had a general election in New Zealand last year. Following an election each government department in New Zealand prepares a detailed briefing for the minister which uncommonly is made public. Our briefing for the Minister of Revenue set out the following policy challenges:
- New Zealand's substantial company tax base is at risk because of our relatively high reliance on corporate tax as a revenue source and the relatively high foreign ownership of companies
- Of particular concern are Australia's lower (30%) company tax rate and its full imputation system, both of which can act as incentives to stream profits abroad
- Problems with our personal income tax structure are also emerging, particularly in relation to the 33% and 39% personal income tax rates. There is growing evidence of tax sheltering and income splitting.
As policy advisor to the government Inland Revenue (with the Treasury) provides ministers with robust and comprehensive advice on all aspects of the design of our tax system and other areas that interact with it.
Typically each year in New Zealand around six major discussion documents, Issues Papers and Rewrite Exposure Drafts are issued for consultation, and generally two tax bills are introduced to Parliament by the Government.
In 2005 for example the Government issued two Discussion Documents:
- Taxation of Investment Income, and
- Implementing Carbon Tax.
Officials issued one Issues Paper:
The Tax Treatment of Expenditure on Geothermal Wells.
Officials also released four Exposure Drafts of rewritten Income Tax legislation.
The following Revenue Bills were introduced in 2005:
- Taxation (Depreciation, Payment Date Alignment, FBT and Miscellaneous provisions) Bill
- Taxation (Annual Rates and Urgent Matters Bill)
- Child Support Amendment Bill.
Moving now to talk about the policy development process...
Given that the tax system is constantly changing it is important of course to have an effective process to develop policy and legislation. In New Zealand we use what is called a Generic Tax Policy Process (GTPP), which I believe is close to an international best practise model. The process covers all aspects of policy development, from an initial idea to implementation. It is transparent and extensive public consultation is a key feature in achieving high levels of ownership of the policy outcomes.
The main objectives of the GTPP (as shown on our website) are to:
- encourage earlier, explicit consideration of key policy elements and trade-offs by Ministers;
- provide opportunities for substantial external input into the policy formulation process, which is intended to increase transparency and to provide for greater contestability and quality of advice at both the conceptual and detailed design stages;
- clarify the responsibilities and accountabilities of participants in the process;
- improve the management of the tax policy process; and
- ensure that the performance of tax policy initiatives, as well as the process of reform, is reviewed regularly.
Under the GTPP major tax initiatives are subjected to broad public scrutiny at key stages in their development. The process enables us to develop more practical options for change, through consultation with professional associations, tax practitioners and those who will be affected by the proposed reforms.
A key feature of the GTPP is the emphasis it places on communication and consultation at each of the main stages of the process.
The GTPP is illustrated in your booklet and has five key development stages:
- Strategic: This involves the development of an economic strategy, a fiscal strategy and a three-year revenue strategy.
- Tactical: This involves the development of a three-year work programme and an annual resource plan.
- Operational: This involves detailed policy design, formal detailed consultation, and Ministerial and Cabinet approval of detailed policy recommendations.
- Legislative: This stage, which can occur concurrently with the operational stage, involves the translation of the detailed policy recommendations into legislation.
- Implementation and review: This involves the implementation of legislation, the post-implementation review of legislation, and the identification of remedial issues.
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Interim Government Tax Policy Work Programme...
The government announced its current tax policy work programme 3 March 2006. The main features of the work programme are a review of business tax, tax measures to increase productivity and growth, and fundamental changes to savings policy and New Zealand's international tax rules. The Minister of Revenue Mr Peter Dunne said the work programme is an interim one until the policy requirements of the business tax review are clearer. He has also said that a discussion document on the Business Tax Review will be released mid year. The content of the policy work programme can be found at the back of your booklet.
Establishing and maintaining good relationships with customers and key stakeholders
- Going now to good relationships, our relationship with New Zealand's key accountancy body, the New Zealand Institute of Chartered Accountants is an example and a model for how we want to work with stakeholders.
Our excellent relationship with the Institute is achieved through regular meetings from senior management, regional and operational level. In addition to seeking their views on policy, legislative and interpretive issues we discuss with them key changes we are planning to how we administer the tax system as well as of course tax policy changes.
One area of success has been our agent account managers where experienced Inland Revenue people actively work with local tax agents to deal with any issues they may have and assist with resolving problems.
We also interact with all New Zealand businesses and most people in New Zealand. We do this primarily by way of relationships, with:
- representative bodies of tax and social policy customers - We now have a small business champion who is accountable for being the voice of small business within the department.
- key stakeholders, including NZICA, other government agencies, and
- though industry partnership arrangements with representative bodies of industry groups.
Of course while most of our customers contact us through our telephone services we also interact directly with them. Through community liaison officer positions we continue to build strong relationships with community groups and individual customers. Our liaison officers' network provides an important face to face service for:
- Small business and tax professionals
- Specific communities such as Maori, Pacific peoples, new migrants and refugees
- Community groups - through seminars and other promotional work.
Managing relationships also recognises the long term role taxpayers, our customers have in the tax system. The more successful we are at managing these relationships the more successful we will be in improving voluntary compliance.
Industry Partnership
A "relationship" based approach also allows us better access to high risk areas and provides increased community visibility.
For example, our industry partnership initiative a long term initiative that has been running since 2002 is designed to improve compliance in small and medium sized industries operating in the cash economy. Based as the name suggests on building relationships with industry associations at national and local level and with individual small businesses we are working closely with the small business sector to identify common problems and reasons for non-compliance.
Industry Partnership Success is shown in the 2004/05 results:
- $14.7 million discrepancies found in industries covered by Industry Partnership
- Fewer debt cases and outstanding returns in the first eight industries covered by partnership arrangements.
- Value of outstanding debt decreased by 5%
- Number of debt cases decreased by 24%
- Number of outstanding returns decreased by 19%.
Employing passionate and engaged people equipped with the right tools and skills
- Employing passionate and engaged people equipped with the right tools and skills
We plan to continually invest in our people and the tools they need to deliver our outcomes.
We need great leaders and managers who can motivate and encourage technically skilled and professional people. Investment in our people is a long term commitment and one that is essential to ensure we have the right people with the right mix of skills and abilities to succeed in our complex and dynamic environment.
Key areas of investment which we believe will enhance our people capability and levels of engagement are:
Leadership skills
We have developed a "Leadership Framework" which describes what we expect from leaders at Inland Revenue.
The framework consists of 4 components:
- Leadership Expectations - Ten statements about how we describe what good leaders and managers at Inland Revenue do. These expectation statements enable us to be more targeted in our development opportunities - offering training and development that delivers the leadership competencies we need.
- Manager Development Programme - All our managers attend a "Leadership in Inland Revenue" course, take part in learning groups and management forums and other external development and learning opportunities.
- Team Leader Development Programme - A two week course which all team leaders attend intended to create a common understanding of our leadership expectations and consistent understanding and use of core management tools across Inland Revenue
- Talent management - Being smarter about how we identify, develop and challenge future leaders in Inland Revenue.
Training
As I talked about earlier, we work across a wide range of tax and social policy areas. To deliver high quality services to our customers requires our people to understand legislation and to have high levels of technical competency as well as the ability to recognise and address emerging compliance issues.
We conduct a considerable amount of technical training during the year ranging from internal paper based courses through to tertiary level courses at various educational institutions.
We are currently actively working to improve our practises around succession and career planning to support our people's career aspirations and to ensure we are growing the talent we need for the future.
Operating a technologically smart and effective organisation.
- Operating a technologically smart and effective organisation
We are focused on how we use our resources and the design of our business processes to ensure we can handle new work, continue to improve our efficiency and remain responsive to the way that taxpayers and social policy customers want to be treated.
Enhancing on-line services...
You may notice in your booklet under the heading "Our Strategic Direction" that we plan to
"Optimise organisational efficiency and reduce compliance costs over time".
We plan to do this by developing smarter ways to work and organise ourselves. We have a strong commitment to e-services and we are also strengthening our technology base to provide an increasingly robust platform for the future.
Our website for example has recently been upgraded to simplify people's interactions with Inland Revenue. There are now more than 70 services that can be accessed via our website, these are summarised on the very back cover of your booklet.
Earlier this month I was pleased and a little surprised to note that Inland Revenue New Zealand's website has won the best government or community website in this year's NetGuide People's Choice web awards.
The NetGuide awards are New Zealand's premiere prizes for excellence on the web. (More than 30 000 people voted in this year's award.) My surprise is not that our website has been recognised for its excellence, however in what is effectively a "popularity contest" it is surprising that Inland Revenue, a tax collection agency has won. Perhaps word has got out -
Inland Revenue = more than just tax!
In Conclusion...
There is a saying that if you get the people issues right the rest of the world falls into place. In Inland Revenue New Zealand we have followed this approach and it is starting to pay real dividends. However as always there is more to do and improvements to make.
Interim tax policy work programme
As at 3 March 2006
Business tax
Business tax review
Review of the taxation of partnership income, including limited partnerships
Depreciation issues including:
- depreciation loadings
- losses on disposal of buildings
Geothermal exploration issues
Gas exploration issues
Tax consequences of International Financial Reporting Standards
International
A review of non-resident withholding tax treaty rates
A review of the rules that govern outbound controlled foreign company investment, including foreign dividend withholding payment and conduit
Consideration of an exemption from the foreign investment fund rules for certain Australian super fund investments
DTA negotiations
OECD initiatives, including tax information agreements
Savings
KiwiSaver (work-based savings)
Collective investment vehicle pass-through proposals
Taxation of outbound portfolio (foreign investment fund) investment
Excessive salary sacrifice
Base maintenance
A review of the use of imputation credits
GST issues
Other initiatives
Rewrite of the Income Tax Act
May 2005 tax bill
May 2006 tax bill
November 2006 tax bill
Indexation of tax rates
Specific compliance and penalties issues
New tax rebate rules for charities
Income splitting discussion document
Review of the racing tax rules
Confirmation of tax rates for 2006-07
Tax agents and their interface with IRD
Westpac's New Zealand corporatisation
GST matters
Child support
Student loans
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Other speeches
- Inland Revenue's challenges and priorities
- New Zealand Credit & Finance Presentation - Debt Recovery in Inland Revenue
- Inland Revenue's approach to Insolvency - The Two Way Street
- Our Job = Improve Compliance
- Leadership and Inland Revenue
- Corporate Insolvency - Taxation Risk Management
- Strategic Human Resource Management for the Public Service
- Managing IT in the Public Sector
- Inland Revenue = more than just tax
Corporate Communications
Inland Revenue
For all media enquiries phone: 04 890 1698
For general communications enquiries
Phone: (04) 890 1936
Email: corpcomm@ird.govt.nz
Fax: (04) 498 5809
P O Box 2198
12-22 Hawkestone Street
Wellington
New Zealand
Date published: 20 Apr 2006
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