Statement of Intent - 2005-08 - Part 3

Forecast departmental financial statements and service performance

Statement of responsibility

The forecast financial statements for Inland Revenue for the year ending 30 June 2006 contained in this report were prepared in accordance with sections 38–42 of the Public Finance Act 1989.

The Chief Executive of Inland Revenue acknowledges, in signing this statement, that he is responsible for the forecast financial statements contained in this report.

The financial performance forecast to be achieved by Inland Revenue for the year ending 30 June 2006 that is specified in the statement of forecast service performance is as agreed with the Minister of Revenue, who is the Minister responsible for the financial performance of the Inland Revenue Department.

The performance for each class of outputs forecast to be achieved by Inland Revenue for the year ending 30 June 2006 that is specified in the statement of forecast service performance, is as agreed with the Minister of Revenue, who is responsible for the Vote administered by the department.

We certify that the information contained in this report is consistent with the existing appropriations and the appropriations contained in the Estimates for the year ending 30 June 2006 that are being laid before the House of Representatives under section 9 of the Public Finance Act 1989.

Signed	Countersigned
Chief Executive	Acting Chief Financial Officer
11 April 2005	11 April 2005

 

Statement of accounting policies

for the year ending 30 June 2006

Reporting entity

Inland Revenue is a government department as defined by section 5(9) of the Public Finance Act 1989.

These are the forecast financial statements of Inland Revenue prepared pursuant to sections 38–42 of the Public Finance Act 1989.

Measurement system

These financial statements have been prepared on the basis of historical cost unless otherwise stated.

Accounting policies

The following particular accounting policies, which materially affect the measurement of financial results and financial position, have been applied.

Revenue

Inland Revenue derives revenue through the provision of outputs to the Crown, other government departments, and for services to third parties.  Such revenue is recognised when earned and is reported in the financial period it relates to.

Cost allocations

Inland Revenue uses an integrated cost allocation process to derive the cost of its outputs.  This process involves the initial costing of business processes followed by the full costing of outputs.

Business processes represent the key functional activities within the department.  These business processes are used to capture direct costs.

Direct personnel costs are charged to business processes based on actual hours and standard activity rates.  Other related direct costs, including depreciation, are allocated to business processes based on actual hours and relevant activity drivers.  Premises costs are charged to business processes based on a combined floor space and actual hours allocation.

Business process costs are allocated to outputs based on specific historical activity drivers for each business process.

Indirect information technology costs are assigned to specific service categories and allocated to outputs based on system usage drivers.

Other indirect costs and corporate overheads that cannot be directly attributed to a business process are apportioned to outputs based on planned business process activity allocations to outputs.

Capital charge

The Crown charges Inland Revenue a levy on taxpayers' funds at the rate of 8% on the capital employed.  This charge is based on the taxpayers' funds held by Inland Revenue as at 31 December and 30 June each financial year, and paid in arrears.

Debtors and receivables

Receivables are recorded at estimated realisable value, after providing for doubtful and uncollectable debts.

Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases.  Inland Revenue leases office premises, computer hardware and office equipment.  Inland Revenue has no leases classified as finance leases.

Fixed assets

The cost of a fixed asset is the value of consideration given to acquire or create the asset and any directly attributable costs of bringing the asset to working condition for its intended use.  The capitalisation thresholds are:

Computer	All
Software development	$50,000 and over
Software purchases	$5,000 and over
Set up of new site or activity	$20,000 and over
Other assets	$2,000 and over
Grouped assets	$20,000 and over

Any write-down of an item to its recoverable amount is recognised in the Statement of Forecast Financial Performance.

Assets under construction represent the costs of assets under development.  The cost comprises direct labour, material purchased and overheads, if appropriate.  There are currently two categories:

• leasehold improvements
• software and IT equipment.

When assets under construction are completed and become operational they are recognised as fixed assets and depreciated over their useful lives.

Depreciation

Depreciation is provided on a straight-line basis on all fixed assets, other than assets under construction.  The rates of depreciation will write off the cost of the assets to the estimated residual value over the useful life of the assets.  The useful lives of major classes of assets have been estimated as follows:

Motor vehicles	5 years
IT equipment	3 – 5 years
Office equipment	5 years
Furniture	7 years
Leasehold improvements	5 – 7 years
Software	5 – 7 years

The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease, or the estimated remaining useful lives of the improvements, whichever is shorter.

Assets under construction are not depreciated.  The total cost of a capital project is transferred to the appropriate asset class on its completion and then depreciated.

Employee entitlements

Provision is made for Inland Revenue's liability for annual, long-service and retirement leave and time off in lieu.  Annual leave, time off in lieu and other entitlements that are expected to be settled within 12 months of reporting date are measured at nominal values on an actual entitlement basis at current rates of pay.

Entitlements that are payable beyond 12 months, such as long-service leave and retiring leave, have been calculated on an actuarial basis based on the present value of expected future entitlements. 

Statement of forecast cash flows

Cash means cash balances on hand, and held in bank accounts.

Operating activities include cash received from all income sources of Inland Revenue, and record the cash payments made for the supply of goods and services.

Investing activities are those activities relating to the acquisition and disposal of non-current assets.

Financing activities comprise capital injections by, or repayment of capital to, the Crown.

Foreign currency

Foreign currency transactions are converted into New Zealand dollars at the exchange rate at the date of the transaction.  Where a foreign exchange cover has been used to establish the price of a transaction, the forward rate specified in that foreign exchange cover is used to convert that transaction to New Zealand dollars.  Consequently, no exchange gain or loss resulting from the difference between the forward exchange contract rate and the spot exchange rate on date of settlement is recognised.

Financial instruments

Inland Revenue is party to financial instruments as part of its normal operations.  These financial instruments include bank accounts, debtors and creditors.  All financial instruments are recognised in the Statement of Forecast Financial Position and all revenues and expenses in relation to financial instruments are recognised in the Statement of Forecast Financial Performance.  All financial instruments are shown at their estimated fair values.

Goods and services tax (GST)

The Statement of Forecast Financial Position is exclusive of GST except for creditors and payables, and debtors and receivables, which are GST-inclusive.  All other financial statements and notes are GST-exclusive.

The amount of GST owing to or from Inland Revenue at balance date, being the difference between output GST and input GST, is included in creditors and payables, or debtors and receivables (as appropriate).

Taxation

Government departments are exempt from the payment of income tax in terms of the Income Tax Act 1994.  Accordingly, no charge for income tax has been provided for.

Commitments

Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that they are equally unperformed obligations.

Taxpayers' funds

This is the Crown's net investment in Inland Revenue.

Changes in accounting policies

There have been no changes in accounting policies and cost allocation policies since the date of the last audited financial statements.

All policies have been applied on a basis consistent with the previous year.

Statement of Forecast Financial Performance

for the year ending 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Revenue
Crown	405,194	405,194	445,485
Other	27,835	27,835	29,436
Total operating revenue	433,029	433,029	474,921
Expenditure
Personnel expenses	262,535	262,535	295,571
Operating expenses	128,648	128,648	135,828
Depreciation	34,823	34,823	34,823
Capital charge	7,023	7,023	8,699
Loss on sale of fixed assets	0	0	0
Total operating expenses	433,029	433,029	474,921
Net surplus/(deficit)	0	0	0

The accompanying accounting policies form part of these financial statements.

Statement of Forecast Movements in Equity

for the year ending 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Surplus/(deficit) for year	0	0	0
Total recognised revenues and expenses for the year	0	0	0
Equity at start of year	87,793	87,793	95,892
Capital expenditure	8,099	8,099	22,518
Repayment of capital to the Crown	0	0	(679)
Provision for repayment of surplus to the Crown	0	0	0
Equity at end of year	95,892	95,892	117,731

The accompanying accounting policies form part of these financial statements.

Statement of Forecast Financial Position

as at 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Taxpayers' funds
Taxpayers' funds	95,892	95,892	117,731
Taxpayers' funds	95,892	95,892	117,731
Represented by:
Current assets
Cash	9,922	9,922	10,567
Prepayments	3,000	3,000	3,000
Debtor Crown	22,000	22,000	27,000
Debtors and receivables	2,837	2,837	2,887
Total current assets	37,759	37,759	43,454
Non-current assets
Fixed assets	114,644	114,644	132,532
Total non-current assets	114,644	114,644	132,532
Total assets	152,403	152,403	175,986
Current liabilities
Creditors and payables	17,898	17,898	19,213
Provision for repayment of surplus to the Crown	0	0	0
Provision for employee entitlements	12,875	12,875	13,722
Provision for restructuring expenses	722	722	570
Total current liabilities	31,495	31,495	33,555
Non-current liabilities
Provision for employee entitlements	23,540	23,540	23,794
Provision for restructuring expenses	1,476	1,476	906
Total non-current liabilities	25,016	25,016	24,700
Total liabilities	56,511	56,511	58,255
Net assets	95,892	95,892	117,731

The accompanying accounting policies form part of these financial statements.

Statement of Forecast Cash Flows

for the year ending 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Cash flows – operating activities
Cash provided from:
Supply of outputs to
- Crown	419,360	419,360	440,485
- departments	2,817	2,817	4,418
- other	25,018	25,018	25,018
Interest	0	0	0
	447,195	447,195	469,921
Cash applied to:
Cost of producing outputs
- personnel	267,786	267,786	302,423
- operating	122,442	122,442	127,250
- net GST paid	1,091	1,091	32
- capital charge	7,023	7,023	8,699
	398,342	398,342	438,404
Net cash inflow from operating activities	48,853	48,853	31,517
Cash flows – investing activities
Cash provided from:
Sale of fixed assets	0	0	0
Cash disbursed for:
Purchase of fixed assets	(60,717)	(60,717)	(52,711)
Net cash (outflow) from investing activities	(60,717)	(60,717)	(52,711)
Cash flows – financing activities
Cash provided from:
Capital expenditure	8,099	8,099	22,518
Cash disbursed for:
Repayment of surplus	0	0	0
Capital repayment	0	0	(679)
	0	0	(679)
Net cash (outflow) from financing activities	8,099	8,099	21,839
Net inc/(dec) in cash held	(3,765)	(3,765)	645
Opening cash	13,687	13,687	9,922
Closing cash	9,922	9,922	10,567

The accompanying accounting policies form part of these financial statements.

Reconciliation of Net Surplus to Net Cash Flow from Operating Activities

for the year ending 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Net surplus/(deficit)	0	0	0
Add non-cash items
Depreciation	34,823	34,823	34,823
Inc/(dec) in non-current employee entitlements	243	243	254
Inc/(dec) in non-current restructuring expenses	(722)	(722)	(570)
Total non-cash items	34,344	34,344	34,507
Add/(less) working capital movements
Inc/(dec) in debtors and receivables	2,721	2,721	(50)
Inc/(dec) in prepayments	4,389	4,389	0
Inc/(dec) in debtor Crown	14,166	14,166	(5,000)
Inc/(dec) in creditors and payables	(3,889)	(3,889)	1,315
Inc/(dec) in current employee entitlements	(1,343)	(1,343)	897
Inc/(dec) in current restructuring expenses	(1,535)	(1,535)	(152)
Working capital movements – net	14,509	14,509	(2,990)
Add/(less) investing activity items
Net loss on sale of fixed assets	0	0	0
Total investing activity items	0	0	0
Net cash inflow from operating activities	48,853	48,853	31,517

The accompanying accounting policies form part of these financial statements.

Statement of Forecast Commitments

as at 30 June 2006

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Capital commitments
Equipment
Less than one year	512	1,614	1,614
Total capital commitments	512	1,614	1,614
Operating commitments
Non-cancellable accommodation leases
Less than one year	19,294	19,223	15,211
One to two years	16,490	15,211	11,251
Two to five years	29,099	19,198	11,154
Over five years	34,689	3,217	2,092
Total accommodation commitments	99,572	56,849	39,708
Other non-cancellable leases
Less than one year	12,096	8,435	21,135
One to two years	0	7,865	20,465
Two to five years	0	23,596	59,737
Over five years	0	7,865	23,819
Total other lease commitments	12,096	47,761	125,156
Non-cancellable contracts for the supply of goods and services
Less than one year	6,919	7,708	6,044
One to two years	241	365	216
Two to five years	0	648	648
Over five years	0	270	54
Total supply commitments	7,160	8,991	6,962
Total operating commitments	118,828	113,601	171,826
Total commitments	119,340	115,215	173,440

Operating leases include lease payments for premises, computer and IT equipment, and office equipment.

Inland Revenue has long-term leases on its premises at many locations throughout New Zealand. The annual lease payments are subject to regular reviews and the amounts disclosed as future commitments are based on the current rental rates.

Commitments for non-cancellable accommodation leases include commitments for the surplus space as a result of organisational restructuring. Provision has been made in the financial statements for the expected net expenses for the duration of the lease in respect of this surplus space.

Inland Revenue has entered into non-cancellable contracts for computer maintenance and other contracts for goods and services.

The accompanying accounting policies form part of these financial statements.

Details of Forecast Fixed Assets by Category

as at 30 June 2006

	At cost   2006 $000	Accumulated depreciation 2006 $000	Net book value 2006 $000
Motor vehicles	4,939	1,567	3,372
IT equipment	55,041	36,275	18,766
Office equipment	20,276	16,611	3,665
Furniture	6,911	5,485	1,426
Leasehold improvements	50,991	40,222	10,769
Software	333,872	254,916	78,956
Assets under construction (leasehold improvements)	2,843	0	2,843
Assets under construction (software/IT equipment)	12,735	0	12,735
Total	487,608	355,076	132,532

 

Details of Historical Capital Expenditure

	Actual 2001 $000	Actual 2002 $000	Actual 2003 $000	Actual 2004 $000
Motor vehicles	694	26	605	46
IT equipment	2,072	8,420	12,084	6,387
Office equipment	1,605	2,797	1,314	2,203
Furniture	151	110	64	399
Leasehold improvements	7,173	6,122	3,448	2,842
Software	24,805	8,510	14,856	10,799
Assets under construction (leasehold improvements)	(2,400)	110	(925)	156
Assets under construction (software/IT equipment)	(11,312)	4,224	(6,855)	10,895
Total	22,788	30,319	24,591	33,727

 

Details of Forecast Capital Expenditure

	Budgeted   2005 $000	Estimated actual 2005 $000	Forecast   2006 $000
Motor vehicles	1,500	1,500	1,500
IT equipment	10,576	10,576	4,197
Office equipment	1,107	1,107	1,103
Furniture	200	200	200
Leasehold improvements	3,286	3,286	2,000
Software	33,685	33,685	24,147
Assets under construction (leasehold improvements)	2,500	2,500	3,000
Assets under construction (software/IT equipment)	10,000	10,000	25,000
Total	62,854	62,854	61,147

Capital expenditure is forecast to be $61,147,000 for the 2005–06 year. The authority for Inland Revenue’s capital expenditure is section 24 of the Public Finance Act 1989.

The forecast capital expenditure for the 2005–06 financial year includes the routine replacement and upgrade of the department’s assets to maintain and enhance capability, as well as the development of systems (software) for new Government initiatives.

Summary of Departmental Output Expenses

for the year ending 30 June 2006

	Revenue Crown 2006 $000	Revenue other 2006 $000	Total revenue 2006 $000	Total expenses 2006 $000
Vote: Revenue
Output expense appropriations
Policy advice	9,963	73	10,036	10,036
Adjudication and Rulings	5,885	1,140	7,025	7,025
Information services	115,988	929	116,917	116,917
Revenue assessment and collection	64,749	1,958	66,707	66,707
Management of debt and outstanding returns	64,445	3,241	67,686	67,686
Taxpayer audit	117,842	919	118,761	118,761
Assessment and collection of child support	66,613	676	67,289	67,289
Collection of ACC levies	0	20,500	20,500	20,500
Total	445,485	29,436	474,921	474,921

All figures are GST-exclusive.

Summary of Forecast Departmental Financial Results

for the year ending 30 June 2006

	Unit	Budgeted   2005	Estimated actual 2005	Forecast   2006
Operating results
Revenue: Third parties	$000	27,835	27,835	29,436
Output expenses	$000	433,029	433,029	474,921
Operating surplus before capital charge	$000	7,023	7,023	8,699
Net surplus/(deficit)	$000	0	0	0
Working capital
Liquid ratio		1.10	1.10	1.21
Current ratio		1.20	1.20	1.30
Average payment period of trade creditors	Days	19.35	19.35	19.40
Resource utilisation
Physical assets
Physical assets as % of total assets	%	75%	75%	75%
Additions as % of physical assets	%	53%	53%	40%
Taxpayers' funds
Level at year-end	$000	95,892	95,892	117,731
Taxpayers' funds as % of total assets	%	63%	63%	67%
Forecast net cash flows
Surplus from operating activities	$000	48,853	48,853	31,517
(Deficit) from investing activities	$000	(60,717)	(60,717)	(52,711)
Surplus from financing activities	$000	8,099	8,099	21,839
Net inc/(dec) in cash held	$000	(3,765)	(3,765)	645

 

Forecast service performance

The figures in brackets refer to performance standards for 2004–05.

All figures are GST-exclusive.

OUTPUT EXPENSE 1
POLICY ADVICE

Description

This output expense provides policy advice services jointly with The Treasury that contribute to achieving the government's tax and social policy outcomes, and improving the economic and social wellbeing of New Zealanders.

Activities undertaken:

• advising on all aspects of tax policy and social policy measures that interact with the tax system
• drafting tax legislation and rewriting the Income Tax Act
• negotiating and maintaining New Zealand's network of double tax agreements with other countries
• forecasting tax revenues
• providing ministerial services.
  

Output 1.1 Policy advice in relation to tax and social policy

Description

This output involves:

• advising on all aspects of tax policy and social policy measures that interact with the tax system
• developing tax and social policy in line with the Generic Tax Policy Process
• drafting tax legislation for introduction in the House and assisting its passage through the House
• negotiating and maintaining New Zealand's network of double tax agreements with other countries
• forecasting future tax flows and other non-tax Crown revenue for the government
• reporting on revenue receipts against forecasts
• analysing revenue implications of changes in tax and social policy.
  

Performance measures

Quantity

We will provide the Minister with:

• tax and social policy advice
• tax legislation
• rewritten tax legislation
• revenue forecasts in accordance with the agreed work programme.

Quality

We will deliver all advice, legislation and forecasts in accordance with agreed quality criteria.

We will manage the development of policy in accordance with the Generic Tax Policy Process.

We will ensure that the Minister is satisfied with the quality of policy advice, tax legislation, revenue forecasts and rewritten legislation provided.

Timeliness

We will provide or deliver:

• all reports and advice
• the tax and social policy work programme
• tax legislation
• rewritten legislation
• revenue forecasts

within the agreed timeframes.

Output 1.2 Ministerial services

Description

This output involves all activities associated with ministerial services, including responding to ministerial correspondence and parliamentary questions.  It includes all tax, child support, student loan and family assistance ministerial correspondence and supply of information.

Performance measures

Quality

We will ensure that all answers are correct, complete, clear and appropriately referenced.

Timeliness

We will ensure that:

• at least 80% of replies to ministerial correspondence are forwarded for ministerial signature within 6 working days
• 100% within 10 working days

of receipt, where the information required to provide a response is readily available.

We will ensure that all responses to parliamentary questions are forwarded for ministerial approval in time to meet parliamentary deadlines.

Activity forecast

Quantity

We will draft responses to an expected:

• 800 to 1,000 pieces of ministerial correspondence
• 200 to 250 parliamentary questions.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $10,036,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	9,963	73	10,036	10,036
2004–05	9,695	34	9,729	9,729
2003–04	9,925	6	9,931	9,997

During 2005–06, the costs of outputs to be supplied within this expense are:

Policy advice in relation to tax and social policy	$8,762,354
Ministerial services	$1,273,646

  

OUTPUT EXPENSE 2
ADJUDICATION AND RULINGS

Description

This output expense provides services that contribute to people meeting payment obligations of their own accord and maintaining their confidence in the tax administration system.  This is achieved by providing clear, correct, impartial and independent interpretations of Inland Revenue Acts (including other relevant laws and consideration of case law), to give guidance and (in some cases) certainty to taxpayers.

Activities undertaken:

• adjudication on behalf of the Commissioner on proposed taxpayer assessments
• providing binding rulings and other statements on the interpretation and application of the law administered by Inland Revenue.
  

Output 2.1 Adjudication

Description

This output involves:

• providing a technical review of existing taxation disputes referred to the Adjudication Unit
• issuing an adjudication report to the parties concerned
• issuing, where required, an assessment consistent with the conclusions of the technical review.

Performance measures

Quality

We will ensure that all adjudication reports supporting each decision meet the purpose, logic and alternatives standards.

Timeliness

On average, we will complete all adjudication cases within 20 weeks of receipt of all necessary information.

Activity forecast

Quantity

We will complete an expected 50 to 70 adjudication cases.

Output 2.2 Rulings

Description

This output involves:

• considering applications for and providing binding public, private and product rulings, and statutory determinations
• developing and publishing non-binding statements on the Commissioner's view of the law administered by Inland Revenue, for example interpretation statements and interpretation guidelines
• preparing and publishing statutory determinations and valuations (for example livestock valuations, taxpayer-specific accruals and depreciation determinations) and handling technical correspondence about these matters.

Performance measures

Quality

We will ensure that all reports supporting the decision to issue, or decline to issue, a private or product binding ruling or determination (and any letter setting out the reasons for these decisions), meet the purpose, logic, alternatives and practicality standards.

We will ensure that all public items giving the Commissioner's view of the law meet the purpose, logic, alternatives, consultation and practicality standards.

We will ensure that all technical correspondence is correct, complete and clear.

Timeliness

We will deliver at least:

• 50% of draft private and product binding rulings and draft taxpayer-specific statutory determinations within 3 months
• 70% within 5 months
• 80% within 9 months

of the receipt of any additional information necessary and the applicant accepting the cost estimate.

Activity forecasts

Quantity

We will finalise the Commissioner's ruling for an expected 700 to 1,100 technical issues contained in:

• applications for private and product binding rulings
• accrual and taxpayer-specific depreciation determinations
• technical correspondence.

We will publish or finalise consideration of an expected 30 to 50 public items, giving the Commissioner's interpretation of the law.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $7,025,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	5,885	1,140	7,025	7,025
2004–05	5,351	1,111	6,462	6,462
2003–04	5,818	1,091	6,909	6,942

During 2005–06, the costs of outputs to be supplied within this expense are:

Adjudication	$1,111,988
Rulings	$5,913,012

 

OUTPUT EXPENSE 3
INFORMATION SERVICES

Description

This output expense provides services that help taxpayers and other customers to meet their payment obligations of their own accord and to receive payments they are entitled to.  This is achieved through a range of proactive and reactive services to make people aware of their entitlements and obligations, and the services available to help them comply.  This output expense also contributes to confidence in the tax administration system through managing individual customer complaints quickly, fairly and in confidence.

Activities undertaken:

• providing information to taxpayers on the application of the tax laws
• responding to enquiries from taxpayers and social support programme clients (excluding child support—see output expense 7)
• providing assistance to the public, businesses and tax agents.

Output 3.1 Information services

Description

This output involves responding to public enquiries on tax and social support programme matters through correspondence, telephone, personal appointments and the Complaints Management Service.

Performance measures

Quality

We will give taxpayers an answer that is correct, complete, clear, timely and appropriately referenced, that also shows an understanding of their environment.  We will improve performance in this area to at least 85% (78.5%).

We will ensure that at least 87% of taxpayers and other customers who have contacted us are satisfied with the quality of the service we provide.

We will fully resolve at least 85% of all calls at the time, requiring no follow-up action.

We will ensure that at least 70% of family assistance recipients who receive a weekly or fortnightly payment are not overpaid.

We will ensure that at least 90% of resident student loan borrowers meet their repayment obligations.

We will collect at least 75% of student loan repayments due.

We will ensure that the number of new debt cases is less than 505,000 (475,000).

Timeliness

We will respond to:

• at least 85% of correspondence within 3 weeks
• 100% of correspondence within 6 weeks

of receipt.

We will answer at least 80% of:

• tax agents' telephone enquiries
• employers' telephone enquiries
• returns and debt collection telephone enquiries

within 20 seconds.

We will answer at least 50% of all other calls16 within 60 seconds, except on days when the total number of calls exceed 17,500.  For the days when total calls exceed 17,500:

• the average speed-to-answer will be 5 minutes or less, and
• callers will be advised of the potential delay and offered alternative services.

We will ensure that at least 49% of taxpayers file their returns on time.

Activity forecast

Quantity

We will answer an expected 7.3 to 8.4 (7.1 to 7.8) million specific customer contacts.

Output 3.2 Advisory services

Description

This output involves proactively providing advice to the public and tax agents on tax and social support programmes through visits, meetings, temporary tax offices and seminars.

Performance measures

Quality

We will ensure that at least 97% of taxpayers and other customers are satisfied with the quality of advisory services we provide.

Activity forecast

Quantity

We will complete between 112,000 and 129,000 (96,000 and 111,000) hours of advisory services.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $116,917,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	115,988	929	116,917	116,917
2004–05	104,050	521	104,571	104,571
2003–04	94,302	220	94,522	96,015

During 2005–06, the costs of outputs to be supplied within this expense are:

Information services	$104,528,540
Advisory services	$12,388,460

 

OUTPUT EXPENSE 4
REVENUE ASSESSMENT AND COLLECTION

Description

This output expense provides services that contribute to the availability of revenue to fund government programmes, as well as ensuring that taxpayers and other customers receive payments they are entitled to, including tax refunds.  This is achieved through services designed to achieve timely, efficient and effective assessment and processing of:

• tax payments, rebates and refunds for taxpayers
• entitlements for social support programmes.

Activities undertaken:

• registering taxpayers
• making tax assessments
• banking tax payments and making refunds
• processing applications and payments for social support programmes
• supplying information to other government agencies
• accounting and reporting the collection of Crown revenue.

Output 4.1 Return and payment processing

Description

This output involves processing all tax returns, issuing assessments, rebates, refunds, notices and statements as well as processing and banking payments, and accounting and reporting the collection of Crown revenue.

Performance measures

Quantity

We will ensure that at least 20% of returns are filed electronically.

Quality

We will correctly process 100% of notices, statements, certificates of entitlement, and loan transfer letters.

We will correctly process 100% of all payments to accounts.

Timeliness

We will issue:

• at least 80% of income tax return assessments within 6 weeks
• 100% within 10 weeks

of receipt.

We will issue:

• at least 95% of FBT and GST return and employer monthly schedule assessments within 3 weeks
• 100% within 6 weeks

of receipt.

We will issue 100% of all non-queried GST refunds within 15 working days of receipt.

We will process and issue:

• at least 90% of rebate claim refunds within 3 weeks of receipt
• 100% within 8 weeks

of receipt.

We will process paid parental leave applications within 5 working days of receipt.

We will bank 100% of payments within 1 working day of receipt.

Activity forecast

Quantity

We will process an expected:

• 7.26 to 8.02 (6.7 to 7.4) million returns
• 7.28 to 8.05 (7.1 to 7.8) million payments.

Output 4.2 Supply of information to other agencies

Description

This output involves the supply of information to other government agencies, in line with the agreements between Inland Revenue and those agencies.

Performance measure

Quantity and timeliness

We will ensure that all information provided to other agencies meets agreed standards.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $66,707,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	64,749	1,958	66,707	66,707
2004–05	55,815	1,718	57,533	57,533
2003–04	57,052	1,544	58,596	59,282

During 2005–06, the costs of outputs to be supplied within this expense are:

Return and payment processing	$65,170,971
Supply of information to other agencies	$1,536,029

 

OUTPUT EXPENSE 5
MANAGEMENT OF DEBT AND OUTSTANDING RETURNS

Description

This output expense provides services that contribute to the availability of revenue to fund government programmes.  This is achieved by:

• ensuring that taxpayers assess their liabilities when required and they and other customers meet payment obligations (or understand the action they need to take to meet overdue obligations)
• taking appropriate enforcement action where people choose not to comply.

Activities undertaken:

• taking follow-up action where returns are outstanding
• taking follow-up action where payments are overdue.

The performance measure detailed below applies to all outputs in this expense.

Performance measure

Quality

We will action all debt and return collection activity appropriately and in accordance with the law.

Output 5.1 Outstanding returns

Description

This output involves all activities associated with collecting outstanding returns, including taking appropriate follow-up action against taxpayers who do not file a return.

Performance measures

Quantity

We will ensure that the number of outstanding returns is less than 573,000 by year-end.

Timeliness

We will ensure that at least 80% of all returns that were not filed by the due date are filed or brought to completion within 12 months.

Output 5.2 Overdue debt

Description

This output involves all activities associated with collecting overdue debt, including taking appropriate follow-up action against those who do not make payments when they are due.

Performance measures

Quantity

We will ensure that the number of debt cases is less than 284,000 by year-end.

Timeliness

We will resolve at least 85% (80%) of all new debt cases within 12 months of the due date for payment.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $67,686,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	64,445	3,241	67,686	67,686
2004–05	60,249	3,000	63,249	63,249
2003–04	56,466	2,822	59,288	60,161

During 2005–06, the costs of outputs to be supplied within this expense are:

Outstanding returns	$22,039,738
Overdue debt	$45,646,262

 

OUTPUT EXPENSE 6
TAXPAYER AUDIT

Description

This output expense provides services to ensure that the revenue base for funding government programmes is protected.  This is achieved by verifying that taxpayers are meeting their obligations through audit activity across all taxpayer groups, specifically targeting risk areas, and taking appropriate enforcement action when obligations are not being met.

Activities undertaken:

• identifying risks to revenue and designing audit activities accordingly
• verifying that tax obligations have been met by auditing a selection of taxpayers

• managing tax litigation.

The performance measure detailed below applies to all outputs in this expense. 

Performance measure

Quality

We will ensure that at least 85% of all cases completed meet our quality standards.

Output 6.1 Individual and small to medium enterprise audit

Description

This output involves the audit of businesses with a turnover of up to $100 million (excluding groups in the Corporates segment).  It includes audits of duties, non-residents, investments and salary and wage earners.

Performance measures

Quality

We will assess at least $535 per hour for all audit activity, including aggressive tax issues and tax evasion.

Timeliness

On average, we will complete:

• general audits within 6 months
• all risk audits within 12 months
• disputed cases (excluding aggressive tax issues) within 18 (24) months.

We will ensure that at least 90% of open cases (excluding aggressive tax issues) are less than 24 months old.

Activity forecast

Quantity

We will complete between 793,000 and 877,000 (778,000 and 863,000) hours conducting all audit activities.

Output 6.2 Corporate audit

Description

This output involves auditing and providing services to large businesses with a group turnover of more than $100 million, plus other specific groups.

Performance measures

Timeliness

On average we will complete investigations within 17 months.

We will ensure that at least 85% of all open cases (excluding disputed open cases) are less than 24 months old.

Activity forecast

Quantity

We will complete between 185,000 and 210,000 (168,000 and 198,000) hours conducting all audit activities.

Output 6.3 Litigation management

Description

This output involves the management of litigation of disputed tax cases, including the requirement to state the case through to resolution by the courts.

Performance measures

Quality

No judgments in the courts will contain adverse judicial comments on the department's conduct of the litigation.

Timeliness

We will ensure that all timetable requirements imposed by the courts on the department's solicitors in tax cases are met.

Activity forecast

Quantity

We will finally resolve 75 to 100 litigation cases.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $118,761,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	117,842	919	118,761	118,761
2004–05	110,027	511	110,538	110,538
2003–04	96,971	215	97,186	98,318

During 2005–06, the costs of outputs to be supplied within this expense are:

Individual and small to medium enterprise audit	$88,860,623
Corporate audit	$22,252,506
Litigation management	$7,647,871

 

OUTPUT EXPENSE 7
ASSESSMENT AND COLLECTION OF CHILD SUPPORT

Description

This output expense provides services to ensure that parents living apart maintain financial responsibility for their children so the children are better able to participate in society.  This includes:

• contributing to the development of the policy framework
• encouraging parents to voluntarily meet their support obligations and where necessary, taking appropriate enforcement action to ensure compliance with the law
• disbursing payments to custodians and the Crown to offset the benefits paid to those custodians.

Activities undertaken:

• providing information and responding to enquiries so that people are aware of their entitlements and obligations under the law
• assessing liabilities
• banking payments
• disbursing payments to custodians
• managing debt and taking appropriate enforcement action against those who do not comply with the law
• providing an administrative process for reviewing assessments that is inexpensive and readily accessible to custodians and paying parents.

Output 7.1 Customer information services

Description

This output involves responding to customer enquiries and providing advice and information on child support matters.

Performance measures

Quality

We will give customers an answer that is correct, complete, clear and appropriately referenced, that also shows an understanding of their environment.  We will maintain performance in this area to at least 88% (92%).

Timeliness

We will answer at least 70% of all phone calls within 30 seconds, except on days when the total volume of calls exceed 3,500.  For the days when total calls exceed 3,500:

• the average speed-to-answer will be 3 minutes or less, and
• callers will be advised of the potential delay and offered alternative services.

We will respond to:

• at least 85% of correspondence within 2 weeks
• 100% of correspondence within 6 weeks

of receipt.

Activity forecast

Quantity

We will answer an expected 930,000 to 980,000 customer contacts.

Output 7.2 Registration and assessment

Description

This output involves the registration and assessment of new child support customers together with the issuing of annual assessments and reassessments to paying parents.

Performance measure

Timeliness

We will issue assessments to at least:

• 70% of paying parents within 2 weeks
• 95% within 6 weeks

of receipt of the properly made application.

Activity forecast

Quantity

We will process an expected 52,250 to 55,000 applications for child support.

Output 7.3 Collection of payments

Description

This output involves collecting and banking child support payments from paying parents.

Performance measures

Quantity and timeliness

We will collect at least 80% of child support assessments (excluding cases we manage on behalf of overseas agencies) for the year ending 31 March 2006.

We will ensure that at least 65% of assessed paying parents (excluding cases we manage on behalf of overseas agencies) will pay their whole liability by the due date.

Output 7.4 Disbursements to custodians and the Crown

Description

This output involves the disbursement of child support payments to custodians and the Crown.

Performance measure

Timeliness

We will make at least 95% of identified payments received by the due date (20th of the month) to custodians on or before the 7th day of the following month.  We will disburse the balance, and any previous payments received prior to the 7th day of the following month, by the 20th of that month.

Output 7.5 Debt management

Description

This output involves all activities associated with the recovery of overdue child support payments.  It includes taking appropriate enforcement action against non-compliers within the child support law.

Performance measures

Quantity

We will reduce the number of paying parents in debt (excluding cases we manage on behalf of overseas agencies) by at least 2%.

Quality and timeliness

We will collect at least 90% of the value of all assessments due (excluding cases we manage on behalf of overseas agencies) from the start of the child support scheme in 1992 through to 31 March 2005.

Quantity and timeliness

We will limit the growth of total debt (excluding penalties and debt we manage on behalf of overseas agencies) to less than 12%.

We will clear at least 55% of paying parent debt cases (excluding cases we manage on behalf of overseas agencies) within 5 months from the end of the month that they are identified as a new arrears case.

Output 7.6 Child support administrative reviews

Description

This output involves providing an administrative process for reviewing child support assessments that is both inexpensive and readily accessible to custodians and paying parents.

Performance measure

Timeliness

We will issue:

• at least 90% of administrative review decisions within 7 weeks 
• 100% within 10 weeks

of receipt of the application.

Activity forecast

Quantity

We will complete an expected 4,600 to 4,850 applications for administrative review of child support assessments.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $67,289,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06	66,613	676	67,289	67,289
2004–05	60,007	440	60,447	60,447
2003–04	55,195	267	55,462	56,179

During 2005–06, the costs of outputs to be supplied within this expense are:

Customer information services	$6,720,010
Registration and assessment	$16,064,110
Collection and payment	$11,620,874
Disbursement to custodians and the Crown	$2,176,970
Debt management	$27,997,320
Child support administration reviews	$2,709,717

 

OUTPUT EXPENSE 8
COLLECTION OF ACC LEVIES

Description

This output expense involves collecting a levy that contributes to government funding for accident compensation programmes.

Activities undertaken:

• collecting ACC employee earners' levy as a component of PAYE deductions
• providing information.

Performance measure

Quality and timeliness

We will pay ACC the determined amounts of earners' levy collected as a component of PAYE, within the agreed timeframes.

Cost

During 2005–06, this output expense will be provided within the appropriated sum of $20,500,000.

Year (Budget)	Revenue Crown $000	Revenue other $000	Total revenue $000	Cost   $000
2005–06		20,500	20,500	20,500
2004–05	0	20,500	20,500	20,500
2003–04	0	20,650	20,650	20,650

During 2005–06, the cost of the output to be supplied within this expense is:

Collection of ACC levies

$20,500,000

 

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Date published: 16 May 2005

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