Annual report - 2004 - Part 3

Tailored services meeting needs from the 2004 Annual Report - 1

A vital part of improving compliance is providing services that assist people who want to comply. Our compliance model promotes a more tailored, responsive approach to taxpayers and recognises the external factors that influence customers' compliance attitudes and behaviours. This year we have been further tailoring our services to improve compliance, and further build community confidence.

Advisory services

We have had a range of advisory services operating in different communities since the early 1990s. These cover:

• Business Tax Information Officers for small and medium sized businesses
• Agent Account Managers for tax agents
• Community and social policy liaison officers for child support and other social assistance work
• Maori Community Officers providing services to Maori.

Advisory officer work includes assisting individual tax agents and businesses, carrying out general education seminars in schools, and taking part in Heartlands agencies in rural communities. This year, 93 ¹⁴ people delivered a total of 118,150 hours in advisory visits to the community. The increase of 127% since 1999-00 reflects our increased focus on working with the community.

^{14 Full-time equivalents. Some advisory roles are full-time positions. In other cases, the function may be carried out as part of a wider job description.}

Our customers have consistently been very satisfied with the quality of our advisory services, with the 97% customer satisfaction rating this year, up 3% on 2002-03.

During 2003-04, we continued to focus on delivering our services to communities and undertook other initiatives to strengthen our focus. The following are some specific examples.

Tax agents

Tax agents play an important role in ensuring the tax system works effectively by helping taxpayers understand and meet their tax obligations. We receive 74% ¹⁵ of income tax returns from agents on behalf of their clients.

^{15 Excludes salary and wage earners.}

We have both tailored and increased our focus on tax agents and their representative groups. Our call centres give priority to tax agents' calls and received over 900,000 calls from agents in 2003-04.

In 2002-03 we enhanced our Agent Account Manager role. These positions work with tax agents to improve compliance and encourage uptake of self-help services such as look at account information service and natural voice recognition.

This year we have seen an improvement in the income tax filing rates by tax agents. By 31 March 2004, 93.35% of agents' income tax returns for the 2003 tax year had been filed. This compares to 92.31%, and 90.48% for the previous two years. Agent Account Managers have been particularly focusing on agents with poorer compliance records.

To continue to improve our services to agents this year, some of our staff spent a few days with a range of agents, from large city agents to small, sole-trader rural agents. This enabled our staff to gain an insight into the day-to-day practices of tax agents so we can improve the design of our services from a commercial perspective.

We have a longstanding and valuable relationship with tax agents through the Institute of Chartered Accountants of New Zealand (ICANZ). We discuss issues with them of mutual interest, and take part in their presentations to members around the country.

A recent example of us working with the private sector for better overall outcomes is our work with farmers and their tax advisors to reach a clearer understanding of the tax treatment of the costs incurred in converting farms to dairying. Uncertainty arose in relation to expenditure on farm conversion costs. This followed Inland Revenue confirming an initial view that when farms are converted to dairying, the cost of re-grassing and re-fertilising are capitalised and therefore needed to be depreciated.

Agreement has been reached with ICANZ on the important issue of the treatment of prior year expenditure on re-grassing and re-fertilising. However, there is some outstanding work in regard to the amortisation rate ¹⁶ to apply to this expenditure. Also, discussions are ongoing on the application date of this agreement.

^{16 An example of this is when a new milking shed was put on a farm's books as a capital item and its value was discounted by 6% a year, a process known as amortisation, while all the associated costs of grassing and spreading fertiliser were expensed in the first year.}

Working closely with the Institute contributes to the development of good tax policy advice through the generic tax policy process and robust administrative systems that reflect an understanding of how the industry operates, its concerns and the requirement to collect tax. Initiatives such as the joint development of best practice guidelines continue to strengthen this valuable partnership.

2003 ICANZ Conference Andrew Minto (right), National Manager Operational Strategy and Design (OSD), at the 2003 ICANZ Conference. OSD is the business unit responsible for managing Inland Revenue's relationship with ICANZ and tax agents. Colin MacDonald (Deputy Commissioner, Business Development and Systems) and Robin Oliver (Deputy Commissioner, Policy) spoke at the 2003 ICANZ Tax Conference. This provided an excellent opportunity to continue to develop Inland Revenue's relationship with the Institute. Colin MacDonald spoke on the tax profession's changing interface with Inland Revenue. He outlined that as the tax system changes, the roles that Inland Revenue and the tax profession have continue to evolve. The changing external environment impacts on our tax system. In response, Inland Revenue is working on strategies such as creating an environment that promotes compliance, and streamlining and simplifying tax processes. Changes in outside influences provide opportunities to take a fresh look at how we do things. Robin Oliver spoke on "Taking a fixed tax position in a changing world: a personal perspective". He pointed to the need for tax advisors to take into account the prospect of legislative change, when giving advice to their clients. He noted that as a general policy, governments have been reluctant to have retrospective legislation but this was sometimes justified. Robin outlined the considerations officials are likely to take into account when advising ministers on whether a legislative change should apply in the future or retrospectively, and whether to include provisions that protect the position taken by taxpayers under the existing law.

Corporates

Our Corporates group deals with the tax affairs of corporate taxpayers, high wealth individuals and other specialist taxpayer groups. This includes ensuring tax obligations have been met for companies with an annual turnover above $100 million, companies whose industry is governed by specialist taxation legislation, or large companies who have non-resident ownership.

About 100 of New Zealand's high wealth individuals and their associated entities have their tax affairs administered by Corporates. High wealth individuals are taxpayers who have assets above $50 million, or display certain high-risk attributes such as involvement in aggressive tax arrangements.

Corporates Group Manager Spyros Papageorgiou says that while corporate taxpayers make up only 0.19% of taxpayers they generate over 45% of revenue assessed. "We are dedicated to strengthening our people and organisational capability to provide a better service to corporate taxpayers. In the 2003 Budget, Corporates received additional funding to address the emerging tax risks associated with aggressive and international tax arrangements of large corporates and high wealth individuals," says Spyros.

Spyros Papageorgiou, Group Manager Corporates, appointed in late 2003

"By ensuring we have people with highly specialised technical and legal skills, appropriate tools and techniques, and by using international expertise, we will ensure this sector is fully complying with its tax obligations."

Industry partnership with small businesses

We are working with small businesses in a number of ways, including policy initiatives, improved processes and through our Business Tax Information Officers. We have improved the targeting of these advisories and also taken part in the Small Business Day series of seminars run by the Ministry of Economic Development.

Industry Partnership was established two years ago to address non-compliance relating to cash transactions and to improve relationships with industries. The businesses involved are mainly small and medium sized. Identifying common problems and reasons for non-compliance in an industry, and acting on those issues effectively across the industry is a key focus for this initiative.

The teams actively follow up issues for the partnered industries, and use education and assistance as well as detection and deterrence to improve compliance levels. We identify issues for follow up in a number of ways, including input from the industry groups which we have entered into a relationship with.

We have relationships with 14 groups to address compliance issues in the cash economy. We started with two industry groups, painters and decorators and electrical contractors in May 2002.

Since then, we have formed a further 12 relationships with industry groups representing agricultural contractors, home-based entrepreneurs, taxis, hairdressers and beauty therapists, collision repairers, automotive repairers, plumbers, long-distance coach drivers, carpenters, plasterers, gardeners and landscapers and the creative arts, with another planned for early 2004-05.

Industry Partnership continues to trial new approaches, such as a tactical campaign conducted with fruit pickers and contractors in the Hawke's Bay region, using media coverage of prosecutions as a starting point. An Industry Partnership team mailed orchardists in the area, then visited more than 115 orchards, providing information and advice on filing returns and paying taxes. This was supported by posters and leaflets, an 0800 number and classified advertising.

We have received positive feedback from the industries involved, for example Don Fraser, Chief Executive of the New Zealand Master Painters Association said "At our conference ...several happy situations were recounted where people had problems and had rung the Industry Partnership and had them solved very quickly and amicably... All the feedback we've had has been positive ...there was some apprehension of course when we decided we were going to have an industry partnership with Inland Revenue, but that was dispelled very early on by people visiting the various associations, and once you get a few good experiences coming out, good news travels quite fast."

(See also debt and audit sections for Industry Partnership results.)

Other pages in: Annual report - 2004 - Part 3

• Our compliance model from the 2004 Annual Report
• Making it easy to comply from the 2004 Annual Report - 1
• Making it easy to comply from the 2004 Annual Report - 2
• Tailored services meeting needs from the 2004 Annual Report - 2
• Focusing audits on long-term compliance from the 2004 Annual Report
• Managing debt and outstanding returns from the 2004 Annual Report - 1
• Managing debt and outstanding returns from the 2004 Annual Report - 2
• Managing debt and outstanding returns from the 2004 Annual Report - 3
• Adjudicating and ruling on the law from the 2004 Annual Report
• Using the full force of the law from the 2004 Annual Report

Date published: 15 Nov 2004

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