Summary of recommendations
Following our inquiry we recommend to the Government that:
1. The Tax Administration Act 1994 (TAA) be amended to provide a clear four-year time bar in relation to all taxes except where the Commissioner of Inland Revenue has reasonable grounds to suspect a return to be fraudulent or wilfully misleading.
2. The burden of proof remain with the taxpayer, but that consideration be given to establishing a “test” for the Inland Revenue Department to meet to ensure that only properly calculated and substantiated amended assessments are issued to complying taxpayers.
3. Section 81 of the TAA be amended to allow for access to personal information, but that this provision be linked to requests for information by the individual concerned under privacy principle 6.
4. An electronic footprint be inserted in the Inland Revenue Department’s files to record who accesses individual taxpayers’ details.
5. The Inland Revenue Department review its approach in respect of the care and management provisions in light of recent Court of Appeal decisions, with a view to amending its internal guidelines to make it clear the Commissioner of Inland Revenue can exercise discretion on a case by case basis.
6. The procedures for monitoring the delegation of the powers of the Commissioner of Inland Revenue be reviewed.
7. With respect to the penalties regime:
- a past record of “good behaviour” be taken into account when deciding whether to impose a penalty
- the Inland Revenue Department exercise a greater degree of flexibility when applying shortfall penalties
- shortfall penalties not apply when it is determined that the taxpayer has made an inadvertent error.
8. The Inland Revenue Department develop a systems audit methodology in order to assess whether taxpayers are adopting a reasonable standard of care.
9. The Inland Revenue Department reinforce both publicly and internally that if a taxpayer or adviser has not interpreted legislation a penalty for unacceptable interpretation cannot apply.
10. The Government review the process by which assessments can be challenged, placing particular emphasis on assessing the merits of establishing a time limit on the Commissioner of Inland Revenue when addressing a taxpayer’s Notice of Response.
11. The method by which use of money interest is calculated be reviewed to determine whether changes to the interest rates for overpayments and underpayments to reduce the differential between the rates are appropriate.
12. The Government review the whole area of write-offs and in doing so consider:
- whether there should be a time limit on the reinstatement of a debt
- whether, if the present policy is to continue, the term “write-off" should be replaced by wording that more accurately describes the policy (for example “provisional write-off")
- whether it is necessary for the write-off provisions to be contained in the Inland Revenue Acts.
13. The Inland Revenue Department issue clear directions to taxpayers as to their options, rights and obligations with respect to repayment arrangements.
14. The ministerial approval thresholds for instalment arrangements and remissions be removed, but that the Commissioner of Inland Revenue be required to provide a regular report to the Minister of Revenue outlining applications for remissions and instalments in excess of $100,000.
15. The Government review the preferential status of the Inland Revenue Department in liquidations.
16. The Inland Revenue Department re-establish a problem resolution service with experienced personnel who are committed to customer satisfaction outcomes.
17. The Inland Revenue Department ensure that the problem resolution service, once established, is well publicised.
18. The Inland Revenue Department advise all complainants, dissatisfied by the results of an internal inquiry, of their rights to appeal to an external agency.
19. The Government establish a specialist tax adviser position within the Office of the Ombudsman, with appropriate resources, to investigate matters of tax administration by the Inland Revenue Department.
20. The Inland Revenue Department investigate ways to preserve over the counter services in areas where it is closing offices, particularly in isolated areas.
21. The Inland Revenue Department enhance its monitoring of telephone services to ensure greater timeliness and accuracy of responses and that the department identify and remedy any skills deficiencies as a matter of priority.
22. The Inland Revenue Department take steps to enhance the timeliness and quality of its responses to written correspondence, and that the performance standard in the 1999/2000 Purchase Agreement of dealing with all correspondence within eight weeks of receipt be reviewed.
23. The Government consider moving the responsibility for drafting tax legislation back to the Parliamentary Counsel Office.
24. The Government consider whether establishing a board of directors to provide an oversight of the Inland Revenue Department’s operation of its powers is desirable.
25. The Inland Revenue Department implement, as a matter of priority, a nationally consistent training programme aimed at improving communication and customer service skills.
26. The Inland Revenue Department consider implementing a programme along similar lines to the Business and Parliament Trust, which would enable staff to build relationships with, and have greater exposure to, the business community.
27. The Inland Revenue Department establish a taxpayers’ charter to outline to taxpayers their rights and obligations in respect of the tax system.