Statement of Intent 2007-10: Part one - Setting the scene

Commissioner's introduction

Inland Revenue aims to improve the economic and social wellbeing of New Zealanders. Our role of collecting and distributing payments makes a fundamental contribution to Government's priorities of economic transformation, families–young and old–and national identity. We also recognise the Government's new sustainability objectives, particularly those related to moving the public service towards carbon neutrality.^[3]

Responding to environmental factors

We work in a continually changing environment, which raises challenges for the tax system and tax administration. Looking forward, these challenges include:

• the successful introduction and operation of KiwiSaver
• implementing Government priorities for major policy and legislative change as they arise
• responding to and delivering our services to a changing customer base
• improving compliance and addressing compliance risks.

KiwiSaver

KiwiSaver aims to improve New Zealanders' long-term savings habits and builds on the Government's efforts to better prepare the country for the challenges of an ageing population.

Implementing KiwiSaver has been a major undertaking in a short timeframe. We have worked closely with external stakeholders, such as employers and scheme providers, to ensure that KiwiSaver will be ready to operate from 1 July 2007.

Policy and legislative projects

Tax policy has a key role to play in support of the Government's economic transformation goals and in reducing tax barriers to New Zealand businesses growing and competing successfully in a global economy.

The Government's Business Tax Review is considering a range of tax initiatives for raising productivity and improving competitiveness, particularly with Australia. Initiatives under consideration range from reducing the company tax rate to introducing tax base initiatives such as targeted tax credits.

The concurrent review of New Zealand's international tax rules complements this work, focusing on changes to improve the international competitiveness of New Zealand businesses. The implementation of legislative changes resulting from these major reviews will become a priority for Inland Revenue's operational areas from 2008.

Ongoing delivery of outcomes

We continue to focus on the effective and efficient delivery of services to achieve our outcomes and we face a number of ongoing challenges to doing this. We need to deliver an increasing range of services to meet changing customer expectations. In some cases, this leads to an increase in customer contacts and more complexity in the nature of our relationships with our customers. Our ability to address these issues requires us to be more agile in responding to their changing expectations.

See Part Three for details of our approach to addressing these issues.

Improving compliance

We are actively taking steps to improve compliance across a number of fronts. We are focusing on:

• effectively identifying and managing revenue risks to our:
  • business tax base, for example, making sure that taxpayers disclose gains on property transactions and pay tax if the profits are taxable
  • corporate tax base, for example, looking at the activities of private equity funds^[4], which could potentially undermine New Zealand's corporate tax base
• individual tax planning around tax rate differences to take advantage of them
• the misuse of GST,arising from the potential use of
• phoenix company^[5] schemes and fraud.
• managing the level of overdue debt across Inland Revenue's debt portfolio, focusing on complex debt avoidance arrangements and audit-assessed debt.

 

We are improving our administration to strengthen our ability to address compliance concerns. For example, we are giving our people the right skills and knowledge to do their work. We are also focusing on attracting and retaining people with the skills we need.

We are also developing other approaches that can help to improve compliance.

We are:

• recommending changes to legislation to close loopholes and prevent the abuse of tax laws
• strengthening our links with international organisations^[6], to put us in a better position to identify and manage compliance issues arising from the impact of changes in the international environment.

Conclusion

I am confident that our focus on improving compliance and developing our capability and agility will place us in an excellent position to address the challenges we face in meeting the expectations of the Government and the community.

Colin MacDonald

Acting Commissioner of Inland Revenue

³ Refer to the Prime Minister's Statement to Parliament (February 2007).
Inland Revenue was identified as one of the initial six government agencies that will commit to reach carbon neutrality by 2012.
⁴ Other international tax administrations, including the United Kingdom and Australia, are also concerned about private equity funds.
⁵ A phoenix company is a company that has been "reborn" soon after its failure. The new company takes on the failed company's business, but without taking on the previous company's tax liabilities. These schemes are of concern given the repeated abuse of liquidation and bankruptcy laws and risks to revenue and the integrity of the tax system.
⁶ Includes the Organisation of Economic Cooperation and Development, the Study Group on Asian Tax Administration and Research and the Commonwealth Association of Tax Administrators.

 

 

Date published: 08 Jun 2007

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