Inland Revenue contributes to the economic wellbeing of Aotearoa New Zealand by collecting and distributing money. That means that the taxes we collect for the government help to fund things like education and healthcare. Taxes also provide money that's paid out in benefits and entitlements to hundreds of thousands of New Zealanders every year through different government agencies.
Most customers want to do the right thing. This is reflected in the high proportion of customers who file returns and make payments on time. Increasingly, customers are filing returns on time and, the rate at which customers made payments on time remains relatively steady. You can read more about these results.
We look at the overall trend for tax revenue to see how the revenue in 2021-22 compares with revenue in previous years.
We assessed $100.6 billion in tax revenue.
| Year | Amount (billion) |
|---|---|
| 2018 | $72.14 |
| 2019 | $77.88 |
| 2020 | $77.66 |
| 2021 | $93.79 |
| 2022 | $100.60 |
The year-on-year increase in tax revenue is mainly due to stronger individuals and companies revenue, partially offset by higher GST refunds. Individuals tax revenue grew by $6.624 billion (15%) as a result of strong employment, salary growth and business profits. Fiscal and monetary support has also played a major role in supporting the economy.
We assure revenue using a range of activities to make sure customers are doing the right thing - from interventions that promote voluntary compliance and prevent revenue loss occurring in the first place, to finding and correcting things where people have got them wrong. We also recognise that some of our compliance interventions result in assurance that future revenue will be returned correctly through changes in customer behaviour and an increased understanding of their obligations.
Our real-time review of all returns filed (including GST and donation tax credits) resulted in $165.8 million of incorrect or fraudulent refunds and tax reductions being stopped at the time of filing. This provided customers with more certainty and reduced the potential for revenue loss.
Using an intelligence-led approach, we have been able to target specific groups of customers to create greater awareness and facilitate compliance. For example, we have seen continued success from our Common Reporting Standards campaign that uses financial account information received from our overseas treaty partners to increase compliance with the tax rules for offshore income. This resulted in 250 voluntary disclosures and an additional $10.9 million of revenue being returned in 2021-22.
Our investigations activities in recent years have expanded to include the upfront review of the COVID-19 products we administer. Through these and our more traditional investigations activities, we have assessed additional tax or protected the integrity of the tax system, returning $9.88 for every dollar spent.
We also estimate how much additional revenue is assured in future years from our work promoting voluntary compliance and undertaking assurance activities. Our work in 2021-22 has assured a further $49 million in revenue for the next 3 years.
Our compliance experts provide certainty for customers on specific tax positions. Through taxpayer rulings, we give our interpretation of how the law applies in specific circumstances.
Another way we provide this certainty is through advance pricing agreements. Advance pricing agreements provide customers with certainty on tax for specific transfer pricing arrangements for an agreed period. In return, Aotearoa New Zealand gets a level of certainty that these businesses are paying the right tax for that period of time.
- This year, we ruled on arrangements worth $8.40 billion with associated tax of more than $1.59 billion.
- On 30 June 2022, 84 customers had active advance pricing agreements with us. These agreements represent approximately $490 million in assured tax each year.
One of the ways we measure progress towards our revenue outcome is looking at the amount of overdue tax debt as a percentage of tax revenue.
| Year | Total tax revenue (billion) | Overdue debt (billion) | Percentage tax debt to revenue |
|---|---|---|---|
| 2019 | $77.88 | $3.49 | 4.5% |
| 2020 | $77.66 | $4.08 | 5.3% |
| 2021 | $93.79 | $4.19 | 4.5% |
| 2020 | $100.60 | $4.60 | 4.6% |
Note: Tax debt and revenue figures exclude child support, student loans, Working for Families Tax Credits, and the Small Business Cashflow Scheme.
In 2021-22, overdue tax debt grew, but given the significant growth in revenue, the percentage of tax debt to revenue of 4.6% remained broadly the same as the previous year.
The ratio of tax debt to tax revenue compares favourably with other similar tax administrations, some of which have ratios of as much as 7% to 17%.
We've worked through options with customers who end up in debt to come up with a plan specific to their circumstances. This year, approximately 120,000 customers set up a plan to pay their tax over time covering $2.38 billion in debt. Of this, $491 million has already been paid in full.
You can read more about tax debt.