Annual Report 2006: Part three - Key strategies

Reducing compliance costs

Inland Revenue's strategic direction recognises the need to reduce customers' compliance costs over time. One of our main approaches to this has been to deliver more cost-efficient electronic options for our customers and tax agents, such as our websites, online return filing and our Look at Account Information service. The delivery of more electronic services can also reduce workload pressures, particularly for our call centres.

It is important that our electronic services are consistent with wider government initiatives, for example the Development Goals for the State Services. In light of this, we are taking a more coordinated approach to developing our electronic services.

However, reducing compliance costs is not just limited to delivering cost-efficient electronic services. In 2005-06, we continued to implement policy measures that simplify tax for small and medium enterprises. These measures are discussed at the end of this section.

Electronic formats for financial information

Inland Revenue is leading a cross-government initiative (reporting to the e-Government Interoperability Framework Management Committee) to examine the suitability of the use of the "extensible business reporting language" (XBRL)²⁸within government.

Some of the benefits of using XBRL include:

• regulators will be able to receive the financial information they need almost instantly
• the generation of cost savings, greater efficiency and improved accuracy to all those involved in preparing, analysing or communicating business information.

Collaborating on e-government initiatives

One of the Development Goals for the State Services is Networked state services that aims to "use technology to transform the provision of services for New Zealanders". Additionally, the Government has a focus on transforming the operation of government through the use of the internet by 2010.

Over the past year, we have been working with a number of agencies including the State Services Commission (SSC) and New Zealand Trade and Enterprise (NZTE):

• we took a leading role in improving the New Zealand Government Web Guidelines as part of a SSC e-government working group. These guidelines ensure government information and services are accessible and can be used by the widest possible audience
• we worked with NZTE on their project to redevelop one of their key websites www.biz.org.nz

Initiatives for small and medium enterprises (SMEs)

In 2005-06 we also made further progress with the Government's programme to specifically target the reduction of compliance costs for SMEs. The initiatives were originally put forward in the Government's 2003 discussion document Making tax easier for small businesses, and followed consultation with business operators and their advisors.

Two of the initiatives are already in place:

• a subsidy for payroll agencies (comes into effect in October 2006), and
• a discount on early payment of income tax (introduced for the 2005-06 tax year).

Two other initiatives are now also being implemented after receiving Royal Assent in April 2006. The new arrangements will reduce the financial strain on businesses by more closely aligning the payment of provisional tax and GST and providing an alternative method of calculating provisional tax by basing it on a percentage of their GST taxable supplies. These changes will be progressively implemented over the coming years.

Operational developments

During the year, we established a dedicated SME team and SME champion to represent the "voice of small business" within Inland Revenue. The team worked closely with industry associations and other SME stakeholders to understand their needs and the realities of running a business. As a result, we have developed solutions that make it easier for businesses to meet their compliance obligations.

The dedicated SME team supplements the work done by our Industry Partnership programme and business tax information officers. Over the past year, both of these areas have continued to focus on delivering information and other services to assist industry groups and, in particular, small and medium enterprises.

We are also undertaking a four-year programme dedicated to SMEs. Examples of the work include:

• establishing a SME strategy, reflecting the customer perspective and the actions that will support enhanced compliance over time
• establishing a SME information strategy to understand how businesses use information so that over time, we target and tailor our information to meet customer needs
• commencing an early intervention initiative for new businesses that sees us proactively contacting customers who are late in filing and paying to address their behaviour early so that cash flow is not adversely affected due to unpaid taxes.

In our work with SMEs, we emphasise tax compliance as a key outcome of a company's good financial management. For example, we are engaging with education providers to integrate tax compliance information into their financial management education.

^28. XBRL enables individual items of financial data to be turned from a simple block of text into information that can be understood and processed automatically by computer software. This can make financial information more accessible and usable across a range of areas.

Other pages in: Part three - Key strategies

• Promoting compliance
• Providing information and support
• Maintaining compliance with the law
• Tackling the harder end of compliance
• Gaining organisational efficiency
• Developing the capability of our people and providing the tools they need
• Becoming an employer of choice
• Excellent state servants
• Key people statistics
• Developing our tools

Date published: 06 Nov 2006

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