Statement of Intent 2008-11: Part three - Strategic overview
Create an environment which promotes compliance
The effective administration of New Zealand's tax system relies on voluntary compliance, so our approach aims to make it:
- easy for customers to meet their obligations and access their entitlements
- hard for customers to avoid meeting their obligations.
This approach builds the community's confidence that Inland Revenue can identify and appropriately address non-compliance where it occurs. Our strategy is based on our compliance model (Figure 6), which emphasises understanding the customer's situation and taking the appropriate compliance action that matches their behaviour. The strategy also helps us to improve compliance by:
- taking an integrated approach to target and tailor specific compliance activities, using our customer perspectives, risk assessment approach and compliance model thinking
- building strong relationships by providing the right experience for customers through the right channel
- focusing on building mutual trust between customers, tax advisors and Inland Revenue 7
- enforcing the law to help move customers who have decided not to comply to a position where they are likely to in the future.
Delivering our services and managing compliance risks
Our ability to improve compliance depends on an effective and efficient tax administration backed by a solid framework of legislation. It also relies on a risk assessment approach that uses customer perspectives, the compliance management programme and our organisational strategies.
Improving compliance is not just focused on taking enforcement-based action. It also encompasses:
- addressing compliance issues by proposing legislative changes
- providing proactive communication to educate customers about their obligations and entitlements and proactive interventions to help customers get it right
- working with intermediaries that provide advice and support to our customers
- engaging with other tax authorities and international organisations to ensure we are aware of international trends.
Addressing deliberate non-compliance maintains public confidence in our administration and protects the tax system's integrity. We can improve compliance by identifying and assessing compliance risks. This allows us to better prioritise our audit focus, develop integrated responses and allocate resources to address the risk area.
Figure 6
Compliance Model
Over the coming years, we will look at:
- making sure that taxpayers disclose gains on property transactions and pay tax if the profits are taxable
- making sure we are responsive to international trends that may threaten the corporate tax base, for example, the use of off -shore structures to avoid tax
- individual tax planning that takes advantage of tax rate differentials
- GST misuse through phoenix company 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 measure our performance in improving compliance through our output-based performance standards (such as timeliness in delivering services, return processing times and the number of debt cases cleared up). This information is supported by a range of general indicators, including the level of audit discrepancies identified and debt outstanding.
7 This is also the focus of the OECD's Study into the Roles of Tax Intermediaries (OECD: January 2008).
Date published: 30 Jun 2008
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