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Statement of Intent - 2004 - Part 1

Strengthening our customer focus - page 23

Our initial view is that much of what we already do for customers aligns with the preliminary views that we have developed. The strategies will, however, provide us with a higher level of assurance that all activities we undertake directly contribute to customer and government outcomes. They will also ensure that we engage the community earlier in our design process.

There are a number of current initiatives that will help deliver improved services to customers.

Large enterprises

Large enterprises are an important sector, generating nearly half the revenue assessed by Inland Revenue. The enterprises often have their headquarters offshore, and manage their tax obligations from an international perspective. Their affairs are complex, very sophisticated, and tend to cross a number of different tax jurisdictions.

Approximately 100 of New Zealand's high wealth individuals and their associated entities are also included in this sector. These are people having assets over $50 million, or having certain high risk attributes such as involvement in aggressive tax arrangements.

We are continuing to strengthen our people and organisational capability to deal with this sector. Since 1994 we have had a unit dedicated to large corporates, with high wealth individuals being added to it in 2003. The unit has two major roles: providing advice on tax matters, and verifying that obligations have been met.

In the 2003 Budget we received additional funding to address emerging tax risks associated with aggressive and international tax arrangements of large enterprises and high wealth individuals. We are now seeking to adopt international best practice in the management of this key sector. 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. We are also making certain that our internal processes ensure that across the department coordinated and consistent responses occur to matters that arise.

We have also identified the need to focus on more timely review of the tax returns and payments made by large enterprises. A significant contributor to this process will be the identification of risk from the review of the returns, and the more focused use of the intelligence information available to us.

We will continue to expand and improve on the response time of the binding rulings service allocated to the unit in 2003. This service will provide greater certainty to those who choose to use it.

On international matters our compliance strategies will focus on:

  • transfer pricing - this will result in improvements in our audit techniques and form a basis for ongoing training for our people.
  • exchanging information - we will continue to work with our treaty partners on the free flow of information to assist in our verification of data.
  • use of tax haven jurisdictions - we are monitoring work that is being undertaken in other jurisdictions to assist us in enhancing our capability in this area.

Small and medium-sized enterprises

Small and medium-sized enterprises are significant in terms of their number and their contribution to growth and innovation in the New Zealand economy. We recognise that tax can take up considerable time and effort, and that if we can make it easier for businesses to meet their obligations, compliance costs will go down. Our initiatives to date have focused on both tax policy and the way in which we administer the tax system.

In September 2003 the Government gave business people an opportunity to respond to four specific proposals designed to streamline tax payment processes:

  • subsidies for people who employ payroll agents to handle PAYE
  • alignment of provisional tax and GST so that they were paid together
  • allowing GST turnover to be a basis for calculating provisional tax payments (linked to the proposal above)
  • a discount for payment of tax in the first year of business.

People responded positively to the proposals and our next step is to work with businesses and their representatives to resolve the issues that were raised. The Government has already decided to implement the option for discounted voluntary provisional tax payments and expects to pass it into law in 2004.

Initiatives to improve administrative processes will also hold significant benefits for small and medium-sized businesses:

  • further expansion of electronic services-all taxpayers will progressively be able to register to securely view their account information online. To encourage small businesses to use this service, support will be given by our advisory staff who will be approaching community groups and tax agents
  • making it easier for businesses when they start and end their business.
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Other pages in: Statement of Intent - 2004 - Part 1
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Date published: 16 Nov 2004

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