Over the last year, Inland Revenue Te Tari Taake has continued to focus on making tax simpler and easier for individuals and businesses, with 99.2% of tax returns being filed digitally in 2023–24.
In New Zealand, we enjoy a high level of voluntary compliance, with nearly 90% of payments made on time this year. We offer help to customers who may be struggling to meet their tax obligations.
New Zealand’s tax revenue has grown to its highest level ever this year with tax revenue for 2023–24 being $115.4 billion. This is 10.5% more than in 2022–23. We continue to focus on making tax and entitlements easy and simple and follow up with those who don’t comply.
Delivering value through our work
During the year, we refreshed our enterprise strategy, which confirmed our core roles of working efficiently and effectively, being active stewards of the tax and social policy system and making a broader contribution across the Public Service through working collaboratively.
The focus of our strategy, in particular being efficient and effective, is consistent with helping us deliver the Government’s priorities for revenue.
The successful completion of our business transformation programme in mid-2022 has created a solid foundation for us to build on and the opportunity to deliver greater value for New Zealanders. This is the final year of reporting the outcomes of the programme and you can read more about what we have achieved here.
Outcomes of the transformation programme
IR delivered a range of initiatives this year intended to improve efficiency and effectiveness across our services. You will see some of these covered in this Annual Report.
During the year there has been a notable growth in overdue tax debt, which is in part due to a difficult economic climate. We are prioritising efforts to manage and recover overdue amounts and are targeting high-value and high-risk debt such as customers with high levels of debt and who persistently default on their obligations.
Many customers with a debt have taken positive steps to deal with it, which includes setting up instalment arrangements this year covering $4.3 billion of debt, of which $461 million had been paid at 30 June 2024. The ability for customers to set up their own arrangements was one of the changes introduced by transformation. Since February 2017, when customers were first able to do this, more than 150,000 arrangements have been paid in full totalling $1.5 billion.
Across our compliance activities we have assessed $975 million in additional revenue. This includes $230 million in incorrect or fraudulent refunds and tax reductions that were picked up by our systems and stopped at the time of filing.
The analytical capabilities delivered by transformation enable checks like these to happen at the time of a transaction, which supports compliance and provides certainty to customers. We can now quickly assess risk on a customer-by-customer basis.
We have increased our enforcement activities this year for the few customers who choose to not do the right thing. We have carried out more audits and liquidations this year than last year. These activities also build trust and give confidence that, if people are doing the wrong thing, we will take action.
The new Government’s priorities include maximising revenue, reducing costs to customers and simplifying processes. In Budget 2024, IR received additional funding to carry out more compliance activities to increase tax revenue. We have committed to a return on investment of $4 for every $1 invested in 2024–25 and $8 for every $1 in future years. The funding will support an increase in investigations and audits as well as focus on debt collection from overseas-based student loan borrowers. This work is happening alongside our existing compliance activities.
Helping customers
Being visible in the communities we work with is important to us and we hosted tax workshops for businesses and sole-traders and visited more than 1,600 customers to explain our services and talk through any areas of concern.
We continued to run awareness campaigns, including a successful campaign targeted at the construction industry, which has led to increased compliance, resulting in $1.2 million of debt being brought under instalment arrangements.
In line with the Government’s priority of reducing compliance costs for individuals and businesses, we have continued to look at what we can do for small-to-medium-sized businesses (SMEs). We are also working to reduce uncertainty for larger companies by providing tailored account management for the biggest companies.
Our Tax Counsel Office also supports compliance through providing clarity and certainty on tax law so that customers can enter into commercial transactions with confidence.
As well as collecting revenue, IR administers a range of social policy payments. Around 336,000 customers receive Working for Families Tax Credits, we facilitate child support for 145,000 children and process KiwiSaver contributions for 3.4 million New Zealanders.
During the early part of 2024, we worked closely with the Ministry of Social Development Te Manatū Whakahiato Ora and the Ministry of Education Te Tāhuhu o te Mātauranga to prepare to implement FamilyBoost, the Government’s new payment to partially reimburse early childhood education costs. We can now implement new products and services much more quickly and cost-effectively as a result of transformation.
To raise awareness about the new scheme and other Budget 2024 changes to Working for Families, we ran online campaigns to reach as many eligible people as possible.
Working together for New Zealanders
Our work is not done alone. We work with other Public Service agencies to deliver greater value together. We also work with partners across the tax ecosystem, including intermediaries, software providers, industry bodies and community organisations, who all contribute to supporting our customers.
To make sure New Zealand remains active in progressing global taxation initiatives, we work with international organisations and New Zealand’s tax treaty partners to support international efforts to ensure that everyone pays their fair share of tax.
The last year has required us to deliver our services in a challenging economic and financial environment and we have asked a lot of our people. I am proud of the work they do every day to deliver positive outcomes for current and future generations of New Zealanders.
Peter Mersi
Commissioner of Inland Revenue Te Tari Taake