Taking an active stewardship role over the tax and social policy system means we need to manage risks and opportunities such as the impact of an ageing population on tax revenue, and the force and pace of change brought by AI and other technologies.
We need to ensure legislation, products, systems, processes, assets and the capabilities of our people are fit for purpose now and in the future.
Our review of the Working for Families Tax Credit scheme, outlined on the page below, is an example of how we’ve begun to do this under our refreshed strategy.
People receive their entitlements
This product affects the wellbeing of over 330,000 families. There is the potential to address the emotional and financial stress families go through if they get into debt and can’t repay it because of the way the scheme currently works.
Tax system in the long term
Long-term thinking is central to our policy work. As noted in our 2022–23 Annual Report, we published a long-term insights briefing on tax, foreign investment and productivity. It provided a platform for IR to advise on corporate tax settings, as you can read in our section on Budget 2025 policy and planning.
Budget 2025 policy and planning
A second draft briefing went out for public consultation in June 2025 with an even wider focus. It explores the implications of rising fiscal pressures for the tax system and what changes could be made to enhance fiscal resilience. It looks at the underlying economic factors of different tax bases and the pros and cons of various design choices within the system.
A key reason why we chose the topic is the long-term fiscal pressure caused by an ageing population. By the late 2050s, a quarter of our population is expected to be over 65, resulting in a lower proportion of our population earning income (and therefore paying tax).
AI opportunities and challenges
IR understands making use of digital tools that are available to us is an important aspect of being efficient and effective, and AI is continuing to change everyone’s jobs and how we live our lives.
In line with Government guidelines, IR advocates for the safe and responsible use of AI. We understand that it is important to have transparency on and accountability for its use and to build trust with the public on what we do with AI and how we use it.
We are taking a deliberate, balanced approach, considering the large potential AI provides as well as the risks it raises. We have introduced an enterprise risk, which considers the management of risks arising from our use of AI or third-party use of AI in the tax and social policy ecosystem.
We understand many New Zealanders are using publicly available reasoning engines to access government-related information. As AI becomes even more pervasive, this is bound to increase as New Zealanders look for opportunities to increase productivity and save on time and cost. We are working on ensuring our content and information is fit for purpose and can be consumed in a manner that leads to the least amount of difficulty and confusion to taxpayers.
Recognising the wide impact that AI can have on New Zealand and New Zealanders, IR is investigating how to ensure the Tax Administration Act 1994 remains fit for purpose for digital advancements such as AI. This work will assess both the risk position we take for interpretation of the legislation as well as the legislation itself. It will also consider its impacts on wider tax and social policy system legislation.
At the same time, integration of AI in our business processes already offers huge opportunities to boost productivity and decision-making. We have strong privacy and data controls in place and established the approach this year for managing and governing IR use while we explore its potential.
IR delivered an AI fluency programme to increase our people’s AI literacy, which has been completed by 2,000 of our staff. It’s being adapted and rolled out to the wider public sector.
We have an ongoing programme of proof-of-concepts and pilots for use of AI in our operations. AI has also been integrated into some customer support and back-office functions, including the following:
- AI and optical character recognition technology has helped to process 70% of FamilyBoost claims.
- Our frontline team are considering and rolling out AI in our customer support channels, including an AI-powered call summarisation solution to improve efficiency and service quality. This achieved a 17% efficiency in the time spent after a call ends and is being rolled out wider across our frontline services.
- AI is being piloted by our policy and legal teams, as part of our software testing and assurance process and in staff support functions to enable further efficiencies and effectiveness.
Strategies and assets to deliver
IR has developed a suite of business strategies to align planning, prioritisation and resource allocation with our strategic intentions. These strategies span areas such as our workforce, technology and security, Māori and Treaty of Waitangi approach and communications channels.
Strategic use of data is a priority for IR—we’re currently reviewing how to bring together core data, analytics and insights functions more effectively.
Owning the right assets and managing them well is also critical to high-quality and cost-effective public services. IR has developed long-term plans for a range of assets.
For example, IR’s START system enables the collection of most Crown revenue, distribution of social policy payments and policy decisions. Ongoing planned investment is essential.
As factors such as demographics, customer changes and increasing digital engagement continue to shape demand, START must remain resilient and adaptable to meet future needs.
Legal certainty and the economic impact of tax rulings
Private, product, and public rulings issued by IR’s Tax Counsel Office legally bind the Commissioner, though not the taxpayer, in the application of tax laws. These rulings provide legal certainty for taxpayers seeking clarity on how tax laws apply to specific situations.
This year marks the 30th anniversary of our introduction of rulings, as legislated in the Tax Administration Act 1994. Rulings have become a core component of New Zealand’s tax system—enhancing its integrity and supporting our ability to positively influence the economy over the short and long term.
Since 1995, we have issued more than:
- 2,600 private rulings
- 540 product rulings
- 390 public rulings.
Each year, we rule on billions of dollars on the most contentious areas of tax risk. In the past year alone, rulings covered arrangements worth $9.9 billion, with $2.4 billion in associated tax at stake.
Rulings have helped shape key sectors of the economy, including:
- The creation of a multi-billion-dollar passive investment industry in the 1990s.
- Government initiatives in the early 2000s to support the screen production industry.
- All 8 public-private partnerships implemented by the Government since 2010.
We continue to evolve the rulings service to meet growing demand and service expectations. Improvements over time have enhanced our timeliness and increased accessibility. We have also extended benefits to more taxpayers through a short-process rulings system for small businesses and individuals and technical decision summaries that share information from private rulings more broadly.
The progress we want to see
Continued change in New Zealand’s tax system and its administration is inevitable. It’s essential that we remain focused on ensuring change does not compromise 2 underlying aspects of it:
- tax and social policy rules are as simple as possible
- the high level of integrity built into the system is not undermined.
In the short term, it’s encouraging to see such broad engagement in our public consultations on proposed policy changes and long-term-focused briefings.
Into the long term, we want our stewardship to create value at 3 levels:
- for IR as an organisation
- for the broader ecosystem, including digital providers, intermediaries and customers
- for New Zealand’s economy and the oranga of its people.