Statement of Intent 2006-09: Part Two - Strategic context
Our outcomes
Our primary and intermediate outcomes (see Figure 4) align with the Government's priorities. The design and administration of the tax system and the revenue we collect contribute to New Zealand's economic transformation and national identity. The social support programmes we administer enable families to have the support and choices they need to be secure and reach their full potential.
An integral part of administering our tax and our social support programme responsibilities is to clearly understand the results we want to achieve - as defined by our outcomes - and how we manage to achieve them.
Figure 4
Our outcomes
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Figure 5
Producing our results
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Managing for Outcomes
Managing for Outcomes helps us to focus on our results (see Figure 4) and plan for, and deliver, the services that will achieve these. In the past year, we further developed our capability to do this by:
- further implementing our Managing for Outcomes framework, ensuring that it drives our planning and reporting activities
- changing our output class structure to align it with achieving our outcomes
- developing a research-based approach to identify result measures to assess our progress towards achieving our outcomes.
Managing for Outcomes provides a sound base for our planning effort (see Figure 5). It helps us identify and prioritise the interventions and strategies that contribute to the outcomes. We will continue to review and refine our approach to ensure that our interventions are contributing most effectively and efficiently to the results we are striving to achieve.
Choosing the right mix of interventions to achieve our outcomes
It is important that people can meet their obligations of their own accord and that they receive their entitlements. We need to make it easy for people to do these. This is one of the main principles underpinning the choice of interventions that we deliver. To help us to identify our interventions, we use our Managing for Outcomes framework and Our Way Forward, which collectively provide analytical rigour around the selection of our interventions.
Our outcomes reflect what we are striving to achieve for all New Zealanders and are the foundation for our Managing for Outcomes framework. These help to:
- focus our thinking on the interventions that will best deliver the results
- support the high-level planning and prioritisation of individual strategies and interventions.
We select our outputs to have the maximum impact on the results we are striving to achieve. We monitor our progress and review our mix of outputs on the basis of the contribution that they will make to our results. We also use information about our customers and their issues, which helps us to understand the possible responses that will ensure we deliver on our outcomes.
We can show this happening in the delivery of appropriate information services to customers. For example, through our call centres:
- we have dedicated phone lines for specific customer group
- sour call centres are open for longer, which means that customers can contact us at times convenient for them
- we offer a wide range of cost-effective electronic services that gives customers greater choice about obtaining the information they need and when they can contact us. This also contributes to a reduction in their compliance costs.
We recognise relative risks when dealing with non-compliance, which allows us to use our compliance model[ 7] thinking as an integral part of our response. This approach provides us with greater opportunity to analyse and deliver the appropriate intervention, particularly in tax evasion, aggressive tax issue cases, and in managing our debt portfolio.
Delivering our services
Our output class structure supports the delivery of our outcomes. This structure:
- helps us to manage our business functions effectively and efficiently
- provides a clear accountability framework for our output delivery and our results.
During the planning for 2006-07 we made major changes to the output class structure. Figure 6 details the 2006-07 output classes and what we do in each of them.
Monitoring our performance
We need to plan evaluative activity to help us measure and monitor our results. We do this by:
- measuring the achievement of our outcomes
- studying the impact of our interventions.
Achievement of our outcomes - outcome indicators
Figure 7 includes examples of some of the indicators that demonstrate our progress towards achieving our outcomes. We already measure the revenue and debt indicators and we will monitor the remaining indicators as part of our evaluation work on Working for Families.
Because 2006-07 will be the first year reporting on the new measures, we see it as a preliminary and baseline-setting year. Impact indicators will be considered, together with the research on the impact of our interventions to determine our success in achieving our outcomes.
| 2006-07 Output class | Intentions |
|---|---|
| Output class 1: Policy advice | We will work on the Government's tax policy work programme, which underpins the Government's revenue strategy. |
| Output class 2: Services to inform the public about entitlements and meeting obligations | We want customers to understand their obligations and to be able to access their entitlements. When customers know what their obligations are and what entitlements they can receive they are more likely to comply and meet those requirements. |
| Output class 3: Services to process obligations and entitlements Output class 4: Collection of ACC levies |
We will encourage people to participate and comply if we undertake processing activities in a timely, efficient, accurate and effective way using streamlined processes. |
| Output class 5: Management of debt and outstanding returns Output class 6: Taxpayer audit |
We will maximise compliance and participation (particularly for child support) by identifying people who do not comply with the law. This will further enhance public perception about the integrity of the tax system. We will also help maximise compliance through providing customers with assistance on how they can meet their obligations. |
|
Intermediate outcomes |
Outcome indicators |
|---|---|
| Revenue is available to fund government programmes through people meeting payment obligations of their own accord. | The amount of revenue collected compared to forecast revenue. The level of collectable debt 8 |
| People receive payments they are entitled to, enabling them to participate in society. | The level of people's awareness of their social support entitlements. The number of people who take up their entitlements (compared to forecast). |
Measuring the impact of our interventions
We are planning a research-based approach to building our understanding of the impact of our interventions and cost-effectiveness.
During the 2006-07 year, we will undertake some preliminary and baseline-setting research looking at our impact on customers meeting their obligations of their own accord. This ongoing analysis will take into account the impact of economic and other factors outside our control and look at the main pathways customers take to access our services.
Following this initial testing, we will review the information gained and look at further opportunities to expand the scope and depth of our investigative work (including expanding the work to cover both our intermediate outcomes). We will also determine appropriate performance information requirements related to impact and cost-effectiveness for inclusion in the 2007-10 Statement of Intent.
We also evaluate selected activities that provide us with important information on their effectiveness, and we use it to shape our future strategies.
Measuring cost-effectiveness
Inland Revenue recognises the importance of tracking the cost-effectiveness of its operations so we can gauge how efficiently we are using our resources and whether we are providing value for money to the government.
Cost of collection and customer to staff ratio
Two indicators of our cost-effectiveness are the cost of collection and the ratio of customers to staff (see Figure 8).
The cost of collection is a simple and widely used measure of efficiency for tax administrations[ 9]. The ratio of customers to staff is also useful as:
- personnel costs represent 62% of our total operating costs
- customer registrations represent the workload factor for tax and social support programme work streams.
Figure 8 - Cost of collection and customer to staff ratio
As the chart shows:
- the cost of collecting $100 of tax has reduced from $0.89 to $0.77
- the number of customers per staff member[10] has increased, which reflects an increase in productivity and efficiency.
International benchmarks
The Organisation for Economic Cooperation and Development (OECD) regularly carries out studies that compare member countries' tax administration systems. The most recent study, published in October 2004[11], places New Zealand's ratio of administrative cost to revenue
(1.17% in 2002) in the same category as countries with similar tax systems-Australia, Canada and the United Kingdom-which have ratios ranging from 1.15% to 1.20%. Since 2002, New Zealand's ratio has fallen to 0.77% in 2005[12], as a result of a higher rate of growth in revenue compared to the rate of increase in cost.
Evaluation
Evaluation studies test the actual results of programmes against stated objectives. They also help to increase our understanding of underlying factors that contribute to our interventions. For example, the evaluation of the communications campaign for phase one of Working for Families identified certain community groups were not fully aware of their entitlement. We used that information to inform the design of the communications campaign for phase two of Working for Families to optimise take-up of entitlements.
Major evaluation projects will continue into 2006-07 from previous years. These are:
- Working for Families - a joint evaluation project carried out with the Ministry of Social Development to assess both the implementation and the outcomes of the initiative. In 2006-07 the focus will be on a quantitative analysis of the impact on eligible families' incomes and employment situations after its first complete year. This will be supported by a large survey of New Zealand families.
- Small- and medium-sized enterprises' compliance costs - to develop a modelling tool that uses previous research on benchmarking of compliance cost. The model will allow us to design new tax initiatives in ways that minimise the impact on compliance costs.
8Collectable debt includes taxation, family assistance and student loan debt but excludes child support.
9This measure should only be seen as an indicator of efficiency and not a definitive measure. This is largely due to the nature of the variables involved in the measure. For example, the amount of revenue collected is largely influenced by the nature of the economy.
10 The information on customer to staff ratio is indexed with the year 2002 having a base value of 100.
11 OECD, Tax Administration in OECD Countries: Comparative Information Series (2004)
12 This calculation uses our own costing method which excludes the cost of running child support.
Date published: 08 Aug 2006
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