Statement of Intent 2007-10: Part two - Strategic context

Environment

We operate in an environment that is constantly changing and becoming more complex. We need to understand the effects of these changes and be ready to respond to emerging compliance risks and increasing customer expectations.

Government priorities

The Government's priorities for 2006 to 2016 are New Zealand's economic transformation, families - young and old - and national identity.

A robust tax system, a stable revenue base, and clear and effective tax laws that minimise compliance costs, play key roles in New Zealand's transformation to a high-income, knowledge-based market economy, and growing globally competitive businesses. The sound administration of our social policy responsibilities helps to give families the support and choices they need to reach their potential within our knowledge-based economy.

Policy and legislation

As well as collecting revenue and administering social policy programmes, Inland Revenue must also quickly accommodate Government priorities for change as they arise.

An example of such a change was the introduction in late 2005 of "interest-free" student loans, which came into effect in April 2006. Similarly, the introduction of the work-based savings scheme KiwiSaver, which Inland Revenue will administer from 1 July 2007, has required a rapid operational response.

Still another example is the Government's Business Tax Review, the direct result of post-election confidence and supply agreements. The review, which began in 2006, has required major resources in the policy development stage and, once it results in legislative changes, will become a priority for the operational areas of Inland Revenue from 2008.

To operate successfully within the political environment, Inland Revenue must be agile and flexible. Our processes and systems must be robust and reliable, yet able to support significant change quickly. We must also be capable of quickly redirecting resources to deliver new government programmes.

It is also of major strategic importance to Inland Revenue to invest resources in maintaining a credible and highly respected Policy Advice Division. The division has a major influence on government policy in the advisory role it shares with The Treasury. In developing policy, the Policy Advice Division also takes into account the associated operational requirements and constraints that will affect Inland Revenue's ability to implement new government priorities.

International compliance issues

The way that people do business internationally continues to affect the risks and issues that we see emerging for our tax administration system.

The challenges to the effective enforcement of tax laws come mainly from the liberalisation of trade and capital movements, and from advances in technology. These trends continue to open the global marketplace to a wider spectrum of taxpayers. Because New Zealand has a small, open economy and is geographically isolated, it is very vulnerable to international non-compliance and changes in its tax base and labour flows. New Zealand has a close relationship with Australia, and developments in the Australian tax system could have a significant impact on us.

We will continue to work on identifying and responding to emerging compliance issues and making sure that we have a strong framework of legislation to enable us to maintain the integrity of the tax system. In particular, we will continue to foster strong relationships with international organisations that allow us to identify and address global compliance issues. For example:

• our strong relationships with overseas tax administrations (such as Australia, Canada, United Kingdom and the United States), give us the opportunity to discuss and exchange ideas and strategies
• taking part in international forums such as the Organisation for Economic Cooperation and Development (OECD) and the Study Group on Asian Tax Administration and Research. Our Deputy Commissioner (Policy), Robin Oliver, is the Deputy Chair of the OECD's Committee on Fiscal Affairs^[7].
• we maintain and extend New Zealand's network of double tax agreements, implementing and improving the provisions of the agreements, and sharing information on mitigation strategies to address non-compliance
• we also continue to provide support and advice to help develop tax authorities in countries around the Pacific region (for example, Solomon Islands and Samoa).

Sustainability

As part of the move to developing a more sustainable economy, Government requires the state sector to move towards being carbon neutral. Inland Revenue was one of six departments selected to develop plans that will help achieve this goal and to have plans in place by early 2008. We are developing those plans now.

We are also implementing sustainable business practices as part of our commitment to Government's Govt³ sustainability outcomes^[8]. In the 2006 Govt³ Awards^[9], we won the Transport and Behavioural Changes categories and were joint winners (with the Ministry of Fisheries) in the Leadership category.

We will keep looking for further sustainability improvements and cost efficiencies to reach our Govt³ improvement targets, introduced in 2005-06. We need to:

• continue to raise awareness and support among our people
• develop ways of running our business that meet our customers' needs, reduce environmental impacts and contribute to society.

Responding to our customers and their expectations

We are continuing the expansion of our range of services as our customer base becomes more diverse and relationships in the community become more complex. These changes impact on how we deliver services, respond to compliance issues, and plan our future resourcing needs.

We face a number issues, including:

• an expanding range of service expectations from our customers. We need to deliver services that respond to a range of customer preferences from traditional (paper-based) to modern (technology-based) ways of working.
• New Zealand's ageing population. This affects our customer base and workforce, and has implications for the way we deliver services in future. Over the next two decades there will be substantial increases in the general population aged over 40 and in the workforce aged over 65. We are identifying the issues presented by an ageing workforce to help us make best use of their experience and knowledge. We also contribute to the Government's Positive Ageing Strategy^[10].
• New Zealand's ethnic profile is changing. Census 2006 identified New Zealand's current ethnicity profile and highlighted the diversity of our population. The implications for service requirements and compliance will be incorporated into our approach to understanding our customers' expectations and delivering the appropriate services.

The state services environment

Our position in the state sector and government and society's expectations also influence the way we work. We collaborate closely with other agencies to deliver integrated and seamless services. Both Government and the community also expect us to provide value for money through workplace productivity. Our planning, financial and management systems are focused on achieving ongoing efficiency.

We continue to work closely with other government agencies to manage and deliver shared services. They include:

• shared governance arrangements for major cross-agency initiatives such as student loans and Working for Families Tax Credits
• delivery of KiwiSaver, Working for Families Tax Credits and student loans
• information sharing with the Customs Service and the Ministry of Justice to help us in compliance and enforcement activities.

The Development Goals for the State Services require us to take a long-term view of our contribution to state sector capability. They focus on achieving "a system of world class professional state services, serving the government of the day and meeting the needs of all New Zealanders". Our approach to achieving this goal is set out in Figure 2.

Through our own e-business programme we are helping to achieve the wider e-government strategy's goal of transforming the operation of the state services. This goal is being achieved through our continued development and promotion of e-services to our customers. In the longer term we plan to establish e-services as our primary delivery channel for customer services.

Adoption of New Zealand equivalents to International Financial Reporting Standards

Inland Revenue will adopt New Zealand International Financial Reporting Standards (NZ IFRS) for the 2007-08 financial year. In preparation for this NZ IFRS information has been collected throughout 2006-07. This information will be used to provide the comparative NZ IFRS information to be reported in the 2007-08 financial statements.

As the forecast financial statements and schedules in the Statement of Intent are for the 2007-08 financial year these have been produced under NZ IFRS.

The consequences of applying the new standards have been fully disclosed in Parts Four and Five.

Summary

Understanding and responding to our environment requires us to manage a wide range of factors in our business. These include:

• the challenges of developing a sustainable economy. We need to prepare for the impact that sustainability initiatives will have on Inland Revenue and the tax system.
• meeting government and community expectations that we will provide value for money through an increased focus on workplace productivity.
• building the agility, flexibility and capability to quickly redirect resources to meet government requirements.
• being aware of international developments, and the risks they pose to our current tax system, and developing the right responses.

⁷ The Committee on Fiscal Affairs has an important role in setting international standards for taxation law and shaping tax policy thinking.
⁸ Govt³ helps agencies focus on and improve their environmental, social and economic wellbeing.
⁹ The Govt³ Awards recognise best practice performance and acknowledge progress made in eight award categories.
¹⁰ 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.

Other pages in: Part two - Strategic context

• Introduction
• Our outcomes
• Choosing the right mix of interventions
• Delivering our services
• Measuring the impact of what we do
• Implementing government initiatives
• Evaluation

Date published: 22 Jun 2007

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