Statement of Intent 2009-12: Part two - Managing in a changeable environment
Environment
To deliver its outcomes in challenging economic times, Inland Revenue must be flexible and respond quickly and effectively to a changing environment.
Government focus
The Government's Budget Policy Statement 2009 indicated the following focus areas for Budget 2009:
- Building a growing economy and providing security and opportunity for New Zealanders
- Getting better value for money from existing government spending.
New Zealand needs an effective and efficient tax administration to ensure a stable revenue base and low compliance costs, in support of these priorities. Inland Revenue is working to provide better value for money, through effective and efficient administration that improves compliance, reduces compliance costs, and gives customers the support and choices they need.
Policy and legislation
Inland Revenue has consistently demonstrated an ability to accommodate government priorities for change, as they arise. Following the change in government in late 2008, we managed a programme of changes to personal income tax rates, in time for implementation on 1 April 2009. Similarly, in early 2009 the government announced a series of tax measures as part of a relief package for businesses, particularly small and medium enterprises, in the face of the rapidly developing worldwide economic recession. These, too, came into force on 1 April 2009 .
To be successful, Inland Revenue must be agile and flexible, capable of quickly redirecting resources to meet government requirements. It is critical that Inland Revenue maintains a credible and highly respected Policy Advice Division. This division plays an important advisory role, along with The Treasury, providing policy advice on tax and social policy matters. In providing policy advice, the division takes into account operational requirements and constraints that may affect Inland Revenue's ability to implement new measures.
Effects of economic recession
The worldwide economic recession affects New Zealand's economy and will flow on to impact revenue collection and debt levels. Businesses are likely to have bills relating to previously profitable periods, which now need to be paid in a climate of reduced spending and income. More marginal businesses could be pushed into debt. The recession will affect our customers' ability to file their tax and make payments. Because of this we expect to see higher tax and social policy debt levels and lower revenue collections.
Effects of globalisation and greater international integration
The liberalising of trade and capital movements combined with technological advances has opened markets to a wider customer base, increasing risks to our tax system. For example, businesses shifting tax liability from New Zealand, increased use of technology to move functions offshore and the transfer of intangibles to overseas entities are risks that make it harder to determine tax liabilities.
Economic and tax developments in other countries affect our tax system. As company tax rates fall in many other countries, multinational companies have incentives to stream profits away from New Zealand or reduce their presence in New Zealand, which can reduce the amount of company tax we collect. This is a concern for us because of our comparatively heavy reliance on company tax. Developments in Australia, our closest economic partner, are important to our tax system. Recommendations from Australia's comprehensive review of its tax system are likely to have a strong influence on trans-Tasman tax matters.
We must continue to work closely with other tax administrations and organisations to manage compliance risks, including:
- taking part in a number of Organisation for Economic Cooperation and Development working parties, which allow countries to compare tax policy, share problems, identify best practice in tax administration, and work to coordinate domestic and international policy
- continuing strong relationships with overseas tax administrations (eg, Australia and Canada)
- negotiating New Zealand's double tax agreements with other countries
- providing technical support to some countries in the Pacific region (eg, Niue and Solomon Islands).
Changing customer base and expectations
There is greater diversity in our customer base arising from New Zealand's changing demographic profile and Inland Revenue's expanded responsibilities. We are engaging with more people, facing increased demand for our services and more complex customer relationships. Since 2000-01, our customer base has increased at a compound annual rate of 6%.[4]
Challenges we face include:
- New Zealand's ageing population - affects our customer base and workforce, and has implications for the way we deliver services in future.
- New Zealand's ethnic profile - Census 2006 highlighted the growing diversity of our population. We need to tailor services and compliance activities to make sure our customers are aware of and meet their obligations, as well as receive their entitlements.
- high demand for our services - we need to manage the continued growth in demand for our information and services. For example, over the past five years, we have seen a significant growth in telephone contact volumes and growing call complexity, which has resulted in increases of 58% in the total time we spent on the telephone and 26% in average handling times.[5]
- an expanding range of service expectations - we need to deliver services that respond to customer preferences, ranging from traditional (telephone and correspondence) to modern self-management (e-services) ways of working.
4 Inland Revenue, Annual Report 2008, p.43.
5 Inland Revenue, Annual Report 2008, p.34.
Date published: 25 Jun 2009
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