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Statement of Intent - 2005-08

Commissioner's introduction

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Our Senior Management Team

Standing: Martin Smith, Colin MacDonald, Robin Oliver. Sitting: Carolyn Tremain, David Butler, Naomi Ferguson.

Inland Revenue's primary outcome is Improving the economic and social wellbeing of New Zealanders. The revenue we assess helps fund the Government's programmes, and the payments people receive helps New Zealanders to participate in society.

Most New Zealanders are willing to meet their obligations of their own accord and this means we need to make it easy for them to do so. At the same time, we need to make it hard for people to avoid or evade their obligations. People tell us that we carry out our work well, with 86%^[3] of people who have recently contacted us rating our services as good or very good.

To maintain this level of satisfaction, along with strengthening the confidence of the wider community in Inland Revenue, we need to be responsive to a wide range of factors. We work in a challenging environment where we need to balance efficiency and effectiveness.

Challenges arise from the nature of our tax and social support responsibilities and the sheer size of our customer base. Understanding these factors is vital for planning the services and compliance programmes that will meet the needs of the government and the community.

Strategic direction setting

Inland Revenue contributes to the Government's goals and strategies^[4] through its outcomes.

Primary outcome

Improving the economic and social wellbeing of New Zealanders.

Intermediate outcomes

Revenue is available to fund government programmes through people meeting payment obligations of their own accord.
People receive payments they are entitled to, enabling them to participate in society.

Supporting our outcomes is the framework of legislation we administer. Together with The Treasury, we will continue to advise the government on all aspects of tax and tax-related social policy. The Government's tax policy work programme, which is updated periodically, will continue to determine our policy development priorities.

To achieve our outcomes we need to describe what we want to achieve as a department. This is set out in our desired future.

Our desired future

Taxpayers and other customers meet obligations of their own accord-and Inland Revenue makes this easy
Increasingly, the community regards paying tax as contributing to society
Inland Revenue is visible in the community, getting alongside taxpayers
The community regards Inland Revenue as professional, approachable, effective and efficient.

Our strategic direction provides a framework for our strategies and plans to improve compliance over the next three years.

Our strategic direction

Streamline and simplify tax processes
Create an environment which promotes compliance
Enhance our people capability
Enhance the administration of our social policy business.

The following section briefly covers our strategies and plans to improve compliance in the coming years. Further details on our strategic direction are set out in Part One of this document. Part Two talks in more detail about our strategies and plans to improve compliance.

Strategies and plans to improve compliance

The strategies and plans described in this Statement of Intent will help us to move towards achieving our outcomes. They will also help us improve compliance and encourage people to meet their obligations and receive their entitlements.

These plans need to be achieved in a time of increased challenges for us from implementing government initiatives and a growing and increasingly diverse customer base.

Streamline and simplify tax processes

We need simple and convenient processes that encourage people to meet their obligations of their own accord. To achieve this we are focusing on:

improving online services so that people have quick and easy access to online information and ways of making payments. For example, being able to securely view their Inland Revenue account (Look at Account Information Service), secure email, and services such as electronic filing and payment options. These services also help reduce the amount of time people need to spend meeting their obligations. We need to make sure people are aware of online services, and encouraged to use them.

simplifying tax for small- and medium-sized enterprises (SMEs) to better tailor our services to help these businesses, at the same time addressing areas of non-compliance (such as the cash economy). This includes encouraging compliance in various industry sectors through our Industry Partnership initiative. We will also be implementing simplification and compliance cost reduction proposals contained in the Government's 2003 discussion document Making tax easier for small businesses.

working closely with tax agents, who represent about 1.7 million taxpayers. Our Agent Account Managers will be further promoting the use of online services to tax agents, as well as assisting them with any problems which may arise.

Create an environment which promotes compliance

We need to create an environment which encourages people to meet their obligations of their own accord. To encourage people to comply we give them information about their obligations and make it easier for them to meet these obligations. We also enforce the law if they do not comply.

We are providing quality services that meet our customer expectations. It is important that we continue to understand our customers and tailor our services to meet their needs and expectations.

Providing information

Providing the right information at the right time is critical for increasing compliance. We provide information through our call centres, websites, brochures, and our business and community liaison officers. It is important we understand taxpayers' expectations, so we can tailor our services. Currently most taxpayers and other customers contact us through our call centres. To make it easier for people to get the information they need we are further developing our online services.

Working in the community

Strengthening community confidence in the way we do our work is fundamental to our ongoing success. Our people working with community groups and individual taxpayers help us to form strong relationships. These relationships help to improve voluntary compliance, the take-up of entitlements, and allow us to show the community that:

we apply the law in a consistent way
we are willing to help resolve their particular problems
we take action where people choose not to comply.

For example, Industry Partnership is a long-term initiative to improve compliance in small- and medium-sized industries operating in the cash economy. We are developing relationships with industry associations at both national and local level to encourage compliance among those willing to comply. With those who are not, we are targeting enforcement action through our investigation teams and taking prosecutions in key areas.

Supporting cross-government strategies

A growing aspect of our role is working with other government agencies to achieve wider government outcomes. For example, the Government has announced a package of policies that New Zealand, as a signatory to the Kyoto Protocol, will implement in responding to climate change concerns. As part of this package the government has proposed that Inland Revenue and the Customs Service administer a carbon tax.

Managing overdue debt and outstanding returns

Our focus is on developing more systematic solutions to make sure people pay and file on time. When debt does occur we are placing more emphasis on:

collecting complex debt cases
more proactive debt collection as part of our audit activities
focusing on high-value debt while recognising the importance of dealing with small-value debt early
making greater use of the tax agent relationship to manage the debt of their clients
making it easier for people to make payments and meet their obligations.

Improving compliance through our audit function

Although most people comply with the law, some choose not to and we need to enforce the law in these cases. Our audit activity checks that people have paid the right amount of tax. It focuses on high-risk areas such as tax evasion (including the cash economy), avoidance, and corporate taxpayers (including high wealth individuals) as well as medium-term audits (for example, for GST and PAYE). Our audit strategy gives a clear direction for our future audit activity.

We will continue to:

focus on high-risk areas while maintaining compliance among lower-risk groups
develop our audit capability through technical excellence, improved risk assessment and case selection processes, and greater use of technology.

Where people choose not to comply with the law we will continue to take enforcement action, including litigation, to ensure compliance.

Enhancing our people capability

We continue to invest in our people by developing their leadership, management and technical skills and making sure we recruit and retain people with the skills we need. Our people's capability is the most important factor in achieving our outcomes and meeting future challenges.

Leadership

Our leaders play a key role in creating an environment where people are keen to achieve. Our people need to have high levels of confidence in our leaders. In our 2004 climate survey, our people were seven percentage points more positive about our leadership than in 2003. Over the coming year, we have plans which will enable our team leaders and managers to have opportunities to further develop and apply their skills.

Internal relationships

It is important that we have a good relationship with our people, especially as we are a large employer with 4,759^[5] staff located in 17 cities and towns. Our 2004 climate survey measured our people's confidence in Inland Revenue as an employer; it showed that we are seven percentage points ahead of a private and public organisations' benchmark, placing us in the top 25% of organisations participating. As nearly 70% of our staff are represented by unions, we recognise the benefits that arise for the department and union members as a result of collective participation in a wide range of initiatives and projects.

Technical capability

Tax and social policy are complex areas and many of the decisions we make need technical knowledge and expertise. It is vital that we continue to develop our technical expertise to achieve our outcomes and ensure confidence in the tax administration. Our technical development programme includes e-learning options and our qualifications strategy. The latter includes:

a parallel qualifications framework with the New Zealand Qualifications Authority and the Public Service Training Organisation.
working with universities to explore flexible ways of delivering selected components of standard courses. This would allow our people to structure both technical and non-technical qualifications to align more closely with our business objectives. Examples include our work with:
- the University of Auckland in offering our staff an extramural postgraduate Master of Tax degree programme
- Victoria University of Wellington, by providing presentations to public sector-related courses conducted by the School of Government
- the Australia and New ZealandSchool of Government (ANZSoG).
our internal training framework promotes ongoing training and professional membership. For example, we are the third largest employer of Institute of Chartered Accountants of New Zealand (ICANZ) members with 286 professionally qualified staff having membership. We are also an ICANZ Approved Training Organisation

Enhance the administration of our social policy business

Inland Revenue has an important and growing role in the delivery of some of the Government's key social support programmes. We deliver family assistance, child support and paid parental leave entitlements, and collect child support and student loan payments.

In the coming years, we will focus on:

implementing two major Government initiatives: the work-based savings scheme and the further stages of the Working for Families package of social assistance reforms
improving child support compliance (encouraging payment of child support in full and on time and addressing child support debt)
making it easier for student loan borrowers to meet their repayment obligations.

Work-based savings scheme

The Government has announced the introduction of a savings package focused on encouraging a change in the savings behaviour of individuals. One element of the package is a work-based savings scheme, with a prime focus on long-term savings for retirement.

Inland Revenue will be the central administrator of the scheme, receiving contributions deducted from individuals' pay, by employers, and distributing them to selected fund providers or to default funds.

The design and implementation of the scheme will be a major challenge for us over the coming 21 months. We will be working closely with other government agencies (particularly the Ministry of Economic Development and The Treasury), and industry representatives to ensure the work-based savings scheme is operational from 1 April 2007.

Working for Families

Over the next three years we are focusing on the ongoing implementation of the Government's Working for Families package. We are working closely with the Ministry of Social Development (MSD) to make sure that:

people know about the Working for Families package
we offer a seamless service across Inland Revenue and MSD.

Child support

We are continuing to invest in our Child Support area to address non-compliance and debt. This investment will help us to increase the number of payments made in full and on time and reduce the growth of child support assessment debt. We will focus on informing new paying parents about the scheme, collecting debts earlier, and taking enforcement action when necessary.

We are also seeking to decrease the amount of child support owed by parents living in Australia, through our reciprocal agreement with the Australian Child Support Agency. Under the agreement, debts will be followed up for payment whether a person is living in Australia or New Zealand. Additional funding received in the 2005 Budget will allow us to increase initially by 3,000, the number of child support debt cases covered by the reciprocal agreement.

Paid parental leave

Inland Revenue disburses paid parental leave on behalf of the Department of Labour. Over the next year we will continue to implement the changes signalled by the Government including:

an increase in the payment period from 13 to 14 weeks
the extension of paid parental leave to include self-employed people.

Student loans

We are focusing on making it easier for student loan borrowers to repay their loans. We are continuing to work with other government agencies on the delivery of the student loan scheme. A key aspect of this work is overdue student loan repayments, in particular the collection of student loan repayments from borrowers based overseas, as well as incentives to encourage voluntary repayments.

Conclusion

The next three years will be very demanding as we address the many challenges we face in achieving our outcomes. These include:

the progression of the Government's tax policy work programme
major changes resulting from the development and implementation of Government initiatives including Working for Families, work-based savings scheme and carbon tax
our work to improve compliance and ensure people meet their obligations and receive their entitlements
developing our people.

I believe that the strategies and plans set out in this Statement of Intent, along with the commitment of our people, will enable us to achieve our outcomes for the government and the community.

David Butler
Commissioner of Inland Revenue

Our structure and governance

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Our governance arrangements allow:

the Senior Management Team^[6] to focus on setting the direction, identifying strategic risks and monitoring performance (including risk management strategies)
the boards and committees to deal with specific management areas.

The roles of the two governance boards are:

Executive Board which examines longer-term strategy, ethics and strategic risks to make sure that we are able to achieve our desired future and outcomes. It also undertakes regular reviews of strategic progress.
Management Board which focuses on major operational issues to do with managing Inland Revenue on a day-to-day basis (for example, high-level business outcomes and outputs, department risks and climate survey results).

The boards are supported by five committees that are responsible for providing strategic overview, monitoring outcomes and performance.

This governance arrangement began in February 2005.

^[3] Annual result 2003–04.
^[4] These include: the Growth and Innovation Framework, Opportunity for all New Zealanders, and the E-government strategy.
^[5] Full-time equivalents as at 31 March 2005.
^[6] The Senior Management Team is made up of the Commissioner, the four Deputy Commissioners and the Chief Tax Counsel.