Statement of Intent - 2005-08 - Part 1
Strategic direction setting
We are striving to achieve our primary outcome of Improving the economic and social wellbeing of New Zealanders.
An effective and efficient tax administration is fundamental to the functioning of the economy. However, Inland Revenue is more than a collector of taxes. Our primary outcome is Improving the economic and social wellbeing of New Zealanders.
We achieve this through:
- advising government, with The Treasury, on tax policy and social policy measures that interact with the tax system
- collecting tax, child support and student loan payments
- making payments such as tax refunds and rebates, family assistance (including the Working for Families package), child support and paid parental leave.
In Part One of our Statement of Intent we discuss:
- the environment we work in, and how understanding our environment helps us to plan for the future (our policy and legislative framework is an important part of our operating environment)
- the results we aim to achieve for government and the community-our outcomes (we also outline how we are measuring and evaluating our performance)
- the processes and strategies that help us choose the right activities to deliver our outcomes.
Environment
We need to have a good understanding of the environment we work in so we can plan for emerging opportunities and risks.
We discuss our environment under these headings:
- New Zealand 's business structures
- New Zealand in the international community
- New Zealand 's diverse population
- Public perception of tax administration
- Public sector management
- Policy and legislation.
New Zealand 's business structures
Inland Revenue's role in the economy is to administer New Zealand 's tax system and some social support programmes. To do this we need to understand the structure of New Zealand business and how it impacts on the economic and social wellbeing of New Zealanders.
Since 2000, the number of business enterprises and employees has grown significantly-see Figure 3. During this period tax revenue has grown 27%.
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New Zealand has relatively few large corporate businesses, but these corporates generate a high percentage of tax revenue. Most of New Zealand 's businesses are small- and medium-sized enterprises (96.8% of businesses in New Zealand have 19 or fewer employees). These small- and medium-sized enterprises (SMEs) also employ 42.3% of all employees[ 7] and create 38.1% of the economy's output [ 8] .
Businesses have different needs for our services depending on their size and where they are in their lifecycles. We are meeting these needs by simplifying our processes and creating an environment that helps businesses meet their obligations. For example, we are offering tax advice to businesses and more electronic services to make it easier for them to make payments of their own accord.
New Zealand in the international community
We continue to advise the government on overseas tax impacts on New Zealand business. They can affect the location of business and investment, New Zealand tax compliance behaviour and compliance costs. We need to consider:
- strengthening trans-Tasman business relationship-offers particular advantages because of our very close relationship.
- New Zealanders moving to other countries to live and work-in some cases people may still have obligations in New Zealand , such as repaying student loans or paying child support. We are dealing with these issues by:
- introducing a wider range of payment options so that it is easy for people to make payments from overseas (for example, accepting credit card payments for student loan and child support payments)
- collecting child support payments using the reciprocal agreement between child support agencies. Under this agreement, a person's debts will be followed up whether they are based in Australia or New Zealand .
- increasing links between New Zealand and the rest of the world through globalisation -globalisation means that more people have electronic access to offshore markets. Because of this, people need to have a better understanding of international tax rules. We address international tax compliance issues in our ongoing policy and compliance work.
To maintain our position in the global economy and strengthen our links with international organisations, we are:
- keeping up-to-date with overseas tax developments, particularly changes to Australian tax policy, which can directly affect New Zealand businesses
- continuing to address the government's responsibilities under international conventions, for example, the Kyoto Protocol, the Convention on the International Recovery of Child Support and other Forms of Family Maintenance
- taking part in international forums, including the Organisation for Economic Cooperation and Development (OECD), the Commonwealth Association of Tax Administrations (CATA) and the Study Group on Asian Tax Administration and Research (SGATAR)
- ongoing liaison with other tax administrations and agencies, such as the Australian Taxation Office and the Australian Treasury, on issues of mutual interest at the strategic, policy and operational level
- maintaining and extending our network of double tax agreements, which are designed to reduce tax impediments to cross-border trade and investment and assist tax administration.
New Zealand 's diverse population
Over 5.7 million individuals, businesses, and other organisations are registered with Inland Revenue as taxpayers. The diversity of New Zealand 's population influences the way we design and deliver the services people need to meet their obligations and receive their entitlements. In particular we need to be aware of New Zealand 's changing age profile, our more ethnically diverse population, urbanisation and changing family profiles.
New Zealand 's changing age profile
New Zealand 's population is ageing. The baby boomer generation is reaching retirement age and people are generally living longer. This change has implications for the economy (for example, pressures of supply and demand on government services in the future) and for workforce planning (for example, changing demands on an ageing workforce).
For Inland Revenue, the ageing population will affect the way we deliver our services and plan our future workforce. We have a range of initiatives that help us:
- meet the service needs of older customers
- identify future workforce trends, and develop policies to make better use of the knowledge, skills and experience of our older workers
- contribute to the Government's Positive Ageing Strategy [ 9].
New Zealand 's more ethnically diverse population
The proportion of Maori, Pacific and Asian people continues to grow. Immigration is adding to this diversity-one in five people living in New Zealand today was born overseas.
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We need to have the appropriate services and compliance activities to make sure that people are aware of and meet their obligations, as well as receive their entitlements. One way we reach diverse communities and respond to population change is through our liaison officers. We have 93 [10] liaison officers who assist individual tax agents and businesses, carry out education seminars and work with various groups in the community. Some liaison officers also work with migrant and refugee communities and their networks (for example, through community newspapers).
Another way that we are responding to the changing diversity is through our Valuing Diversity Strategy. This strategy is helping us to build greater diversity in our workforce, so we can:
- reflect the diverse nature of New Zealand's population
- better understand the community's needs, so that we can help people meet their obligations and receive their entitlements.
Urbanisation of the population
Over the past 50 years, the distribution of New Zealand 's population has changed greatly with more people living in our towns and cities. This changes the pattern of demand for our services. By 2021, the Auckland region will be home to 37% of all New Zealanders and 47% of people living in the North Island , compared with 31% and 41% in 2001 [11] . Ways we have responded to these changes include using new technology and taking part in Heartlands agencies in rural communities-but we need to continue to look at how we deliver the range of our services.
Changing family profiles
We play an important role in the delivery of services to families by administering child support and family assistance, including Working for Families.
Over the last 20 years there has been a significant change in the profile of families-see Figure 5.
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Our delivery of both child support and family assistance is affected by the changing profile of families and the increasing number of customers we are dealing with, as our social policy role grows.
Family incomes are also important. In 2003-04, 70% of one-parent families had an annual income before tax of $37,899 or less [12] . The Government's Working for Families package will give financial support to:
- almost all families with incomes under $45,000 a year
- many families with incomes between $45,000 and $70,000 a year.
Our growing social policy role means that more people need to contact us about a wider range of activities. For example, customers may receive child support payments and also qualify for Working for Families payments. To make sure people receive their entitlements, we are:
- informing the community by advertising and through the work of our liaison officers
- working closely with the Ministry of Social Development so customers receive a seamless service.
Public perception of tax administration
How we go about delivering services and undertaking enforcement activities can influence the public's perception of our work. Our Charter (see page 30) sets out the standards that people can expect in their interactions with us. These help maintain and strengthen public confidence in our administration of the tax system. Our Code of Conduct helps us to exercise common sense judgement and the appropriate use of our powers.
Changes in public perception or confidence in our administration may reduce the overall level of compliance and make it more difficult to achieve our outcomes. The feedback from the many people who have recently contacted us shows that they find us approachable, responsive, professional and effective.
Our Complaints Management Service, and parliamentary and public scrutiny also helps us to maintain public confidence. We also research our customers' needs and analyse the reasons why they contact us. These activities help us to improve the services we offer so that they meet or exceed people's expectations.
Public sector management
Public sector management is influenced by government and community expectations. For example, in March 2005, the State Services Commission released Development Goals for the State Services. We need to consider these expectations when looking at our workforce and the way we deliver our services to the government and the community.
Other factors influencing the way we work are:
- the continued focus on coordination with other organisations. For example, we are working closely with the Ministry of Social Development on Working for Families, and we are delivering our services in rural communities through Heartlands centres.
- the ongoing development of the E-government strategy to simplify access to government information through the internet, such as through the government portal www.govt.nz . We are increasing our online services, and at the same time recognising the need to deliver services by other means [13] .
- the emphasis on Managing for Outcomes confirmed by the Public Finance Amendment Act 2004. This framework helps us to focus on the results we need to achieve for government and the community.
These influences provide opportunities for how we continue to develop our people capability and service delivery functions.
Figure 6-
Development Goals for the State Services
| Development Goals | State Services Commission aspirations for June 2007 | How Inland Revenue is currently supporting the achievement of this goal |
|---|---|---|
| Goal 1: Employer of Choice | ||
| Ensure the State Services is an employer of choice attractive to high achievers with a commitment to service. | A comprehensive guide to good employment practice developed with input from State Service employers and unions, in place for use across government agencies. | By using and modelling good employment practices. Our people, through our climate survey continue to acknowledge us as a good employer. We maintain good relationships with the unions representing our people. This links to our focus on enhancing our people capability. |
| Goal 2: Excellent State servants | ||
| Develop a strong culture of constant learning in pursuit of excellence. | A framework for learning and development across government agencies. | By continuing to develop our people's leadership, management and technical capabilities. This links to our focus on enhancing our people capability. |
| Goal 3: Networked State Services | ||
| Use technology to transform the provision of services for New Zealanders. | Networks and internet technologies are integral to the delivery of government information, services and processes. | By enhancing our electronic services through our e-enablement strategy. (This is consistent with the aims of the E-government strategy.) This links to our focus on streamlining and simplifying tax processes. |
| Goal 4: Coordinated State agencies | ||
| Ensure the total contribution of government agencies is greater than the sum of its parts. | Government agencies demonstrating improvement through Managing for Outcomes, including joint outcomes and other shared accountabilities across clusters of agencies. | By focusing on achieving our outcome to Improving the economic and social wellbeing of New Zealanders, we work closely with other government agencies to provide advice to the Government and deliver seamless social support services. This links to all the elements of our strategic direction. |
| Goal 5: Accessible State Services | ||
| Enhance access, responsiveness and effectiveness, and improve New Zealanders' experience of State Services. | No wrong door—any New Zealander accessing government services will be referred appropriately to the organisation best able to address their concerns. | By referring customers to the right organisation to answer their query. For example Working for Families, where we can provide an overview of the entitlements from MSD, but would refer the customer to MSD for detailed information. This links to all the elements of our strategic direction. |
| Goal 6: Trusted State Services | ||
| Strengthen trust in the State Services, and reinforce the spirit of service. | Agencies of the State Services demonstrate their commitment to earning trust by working with the State Services Commissioner to develop and promote codes of conduct. | By promoting our Charter (our commitment to the community) and refreshing our Code of Conduct, which builds on the New Zealand Public Sector Code of Conduct. This links to our focus on enhancing our people capability. |
We will continue to work with the State Services Commission to further develop our ability to contribute to these development goals.
Policy and legislation
The operation of the tax system is governed by legislation enacted by Parliament. Inland Revenue's Policy Advice Division plays a key role in helping to shape policy and legislation-not outcomes in themselves, but means of achieving outcomes-through the advice it and The Treasury give to the government and parliamentary select committees.
To fulfil this role, Inland Revenue needs to be capable and well-respected and provide the highest possible quality advice to the government.
In managing the Generic Tax Policy Process, Inland Revenue consults extensively with the private sector, professional associations and other government departments, ensuring that policies are workable and can be delivered in the most effective way.
The work of Inland Revenue is determined largely by the priorities of the Government, with the main emphases of the Government's work programme being growth and innovation, social cohesion and revenue base maintenance.
Our outcomes
Our outcomes represent what we are striving to achieve for government and the community. To achieve our outcomes, we need to align our strategic thinking and planning with our day-to-day activities and wider government goals.
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As part of our strategic planning for 2005-08, we aim to give government, the community and our people:
- a clear understanding of how our activities contribute to our outcomes
- better information about what we have achieved.
Part of this process has resulted in a new primary outcome and two related intermediate outcomes (see Figure 8) that cover all the activities that we do as an organisation.
Figure 8 -
Inland Revenue's outcomes
| Primary outcome |
|
|---|---|
| Intermediate outcomes |
|
Our primary outcome
- Improving the economic and social wellbeing of New Zealanders.
Our primary outcome provides a high-level focus for planning across all our work.
We can influence the achievement of the primary outcome by:
- working with The Treasury, Ministry of Social Development, Ministry of Education and other government agencies to advise the government on the design of tax and social policy (that interacts with the tax system) and legislative framework
- collecting revenue and other payments effectively and efficiently
- paying refunds and other entitlements quickly and accurately
- effectively administering social support programmes including aspects of the student loan scheme
- making sure that people have confidence in our administration of the tax system by being professional, approachable, effective and efficient.
The primary outcome is supported by two intermediate outcomes.
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.
The intermediate outcomes help us focus on the results we want to achieve and what we need to do to achieve them.
These outcomes help us to:
- collect tax and other payments (for example, child support and student loan repayments)
- make sure people receive what they are entitled to (such as family assistance, child support, paid parental leave, and tax refunds and rebates).
To do this, we need to create an environment which promotes compliance and encourages people to comply with their tax and social support obligations of their own accord. At the same time, we need to enforce the law when people choose not to comply.
Our outcomes are supported by:
- our desired future and our strategic direction (see Figures 12 and 13), which set out our longer-term business
- our output expense structure and related outputs (see Part Three) that show how we advise on policy and deliver tax and social support services.
Figure 9 -
How our output expenses contribute to our outcomes
| Output expense | How it contributes to outcomes |
|---|---|
| Policy advice | Together with The Treasury, we provide advice to the government that is consistent with its tax and social policy outcomes. The policy advice function also includes:
|
| Adjudication and Rulings | Our Adjudication and Rulings Unit helps maintain taxpayers' confidence in the tax administration. It gives guidance on the correct interpretation of the Inland Revenue Acts and other relevant laws. The Adjudication Unit, as part of the disputes resolution process, takes a fresh, impartial and independent look at tax disputes. The Taxpayer Rulings Unit makes private and product rulings and some taxpayer determinations. The Public Rulings Unit considers complex tax issues and issues public rulings, interpretation statements and guidelines. |
| Information Services | Our information services advise taxpayers and other customers on new and existing laws to help them meet obligations in full and on time and to receive their social support payments. We also provide a complaints management service. |
| Revenue assessment and collection | People want quick and easy ways to pay their obligations and receive their entitlements. This includes: applying for IRD numbers, calculating and paying their taxes and student loans, and receiving rebates, tax refunds and social support payments. Inland Revenue needs to process revenue quickly and efficiently to maximise teh availability of revenue to fund government programmes. |
| Management of debt and outstanding returns | Inland Revenue follows up when taxpayers have not filed a return when expected, or they ahve not made payments in full and on time. By doing this we make sure that the government recieves the correct revenue. |
| Taxpayer audit | Inland Revenue auits taxpayers to check that the government has received the right amount of tax. We aim to improve overall tax compliance by auditing high-risk taxpayers while continuiing to maintain compliance in lower risk areas. This output expense also includes the management of tax litigation. |
| Child Support | Parents who live apart from their children need to support them financially so they can participate in society. Our Child Support area encourages compliance with the Child Support Act 1991. This activity ranges from advising people through to taking action to make sure they meet their child support obligations. |
| ACC employee earner's levy | We collect the ACC employee earners' levy as part of PAYE deductions - contributing to government's revenue. |
Measuring and evaluating our performance
Our outcomes show what we are striving to achieve. Our strategies set out how we will achieve our outcomes and are explained in Part Two. Our outputs show how we will deliver our outcomes for taxpayers and social support customers (see Part Three).
We need to measure how well our activities are helping us achieve our outcomes and desired future.
We already have some high-level indicators that link directly to our outcomes (see Figure 10). During 2005-06, we are further developing these indicators as part of our commitment to a stronger performance measurement framework. This framework will measure high-level achievement of our outcomes as well as help in the day-to-day running of Inland Revenue.
Figure 10 -
Measuring our performance
| Outcome | Indicator |
|---|---|
| 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. |
|
These indicators are backed by a range of other measures based around individual functions, services and capability. For example:
- student loans repaid
- percentage of paying parents who pay in full and on time
- climate survey of our people
- benchmarking some of our organisational efficiency measures against other tax authorities.
Revenue forecast
Our revenue forecasts provide a measure against our intermediate outcome of Revenue is available to fund government programmes through people meeting payment obligations of their own accord. For the 2005-06 financial year, we forecast that we will assess $43.543 billion in direct and indirect taxation. Figure 11 shows the revenue forecast broken down into major tax categories.
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Evaluation
An important aspect of managing our performance is evaluating the impact of our work and how it has contributed to our outcomes. We do this through:
- project reviews. All major projects must have a “post-implementation” review. These reviews look at project management and whether the project goals were achieved.
- our Evaluation Services Unit helps us shape both our ongoing activities and new initiatives. It carries out independent evaluations that:
- focus on what outcomes have been or will be achieved
- look across functions or areas of responsibility
- are linked to our strategic direction.
A major piece of work from now to 2008 is evaluating the implementation of the Working for Families package.
Choosing the right activities to achieve our outcomes
We have a desired future for Inland Revenue which shapes our thinking on the way we go about our work.
Figure 12 -
Our desired future
|
Our desired future is supported by a strategic direction that keeps us focused on achieving our outcomes.
Figure 13 -
Our strategic direction
|
Our planning process
To deliver our desired future, we need to assess future opportunities and risks, and identify our priorities. We have developed a set of integrated planning and thinking tools to help us achieve this. The process is shown in Figure 14.
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We are continuing to strengthen our high-level strategic planning so that we:
- improve the way we monitor our progress towards our desired future
- assess our goals and strategic direction, including scanning our environment to understand its implications for the future direction of our business
- improve our understanding of what is important and our ability to prioritise
- link high-level strategy with detailed planning of how we deliver our services.
Our core capabilities
Our core capabilities reflect our current and future strengths. They represent our organisational skills. Understanding these capabilities helps us to maximise and preserve our strengths, and to better understand how we can achieve our desired future.
In deciding on our core capabilities, we looked for characteristics that:
- are sustainable-the capability lasts
- provide points of leverage for the organisation (that we can still look to improve on)
- align with what others think we are good at
- are difficult for others to replicate.
Our core capabilities
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Inland Revenue's three distinct capabilities are:
- Capability to understand financial information in a tax context. Most of our tax and social support work relies on the financial information we hold. Understanding this information, and how it relates to the tax and social support services we deliver, helps us to make sure people meet their obligations and receive their entitlements.
- Capability to build and deliver processes. Over a number of years, we have improved our ability to design and deliver high-volume processes (for example, payments processing). We have strong process and project management ability. We have shown that we can run these processes in a
cost-effective way that compares well with a range of international business practices. - Capability to support compliance. This capability is based on our role, reputation and culture. The majority of taxpayers and other customers meet their responsibilities of their own accord. We support compliance through:
- the systems, processes and deterrents we have in place
- the rules we operate under to make sure that the community see us as professional, approachable, effective and efficient
- our Charter and Code of Conduct
- our organisational knowledge, practices and expertise that encourage and, when needed, enforce compliance.
Mitigating risk
Our ability to achieve our outcomes depends on our ability to identify and manage risks. This is achieved by having strong governance structures and sound risk assurance frameworks.
Last year we made changes to our governance structures to improve our ability to manage significant strategic and business decisions appropriately. The new internal governance boards and committees (as discussed earlier) began in February 2005.
Inland Revenue also uses the standard Australia/New Zealand risk management framework that enables risk to be identified, analysed and managed. The risk management framework applies to strategic or operational initiatives and activities or projects.
Inland Revenue ' s Charter
Te Tutohinga a Te Tari Taake
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[7] Calculated on a full-time equivalents basis.
[8] Industry and Regional Development Branch, Ministry of Economic Development, SMEs in New Zealand : Structure and Dynamics , September 2004.
[9] A government-wide strategy that aims to improve the opportunities for older people to participate in the community in the ways they choose. The opportunities cover a range of social areas and include service delivery and the workplace.
[10] Full-time equivalents as at June 2004. Some advisory roles are full-time positions. In other cases, the function may be carried out as part of a wider job description.
[11] Statistics New Zealand , Demographic Trends 2004, January 2005, p. 161.
[12] Statistics New Zealand , Hot Off The Press - Household Economic Survey Year Ended 30 June 2004 . One-parent families are “one family, one parent with children only” households.
[13] State Services Commission, Achieving E-government 2004, October 2004, pp. 10 and 11.
Various surveys discussed in this report identified that there was a large percentage of New Zealanders that did not use the internet to access government services.
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Date published: 16 May 2005
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