Chapter 8 - Sharing PAYE information with other government agencies

8.1 This chapter’s focus is on making it easier for people to deal with government agencies. Wider use of information by government would allow improved service.

8.2 Inland Revenue has access to a wide range of information about individuals, including (where applicable) their name, address, income, dependents, student loan details, and social policy entitlements. The new technologies and associated infrastructure, as discussed in the preceding chapters, would improve the efficiency, reliability, and accuracy of the PAYE information collected and would provide Inland Revenue with more frequent and timelier information about individuals.

8.3 Often, information collected by Inland Revenue is also collected by other government agencies so they can provide their services to individuals. For example, the Ministry of Social Development (MSD) requires that benefit recipients report any changes in their income so that benefit entitlements can be adjusted to correspond with that recipient’s needs.

8.4 The Government considers there is scope to use this information to deliver a better, smarter public service, within a limited increase in public funding. To that end, the Government is considering the possibility of a new framework for sharing PAYE information with other government agencies, and in the first instance, sharing PAYE information with MSD.

8.5 The Government’s view is that when interacting with government agencies, individuals expect to be provided with service levels similar to those they experience elsewhere. They also expect that their entitlements and obligations to be met without them having to provide the same information multiple times. The proposals to share PAYE information with other government agencies would, in certain situations, remove the requirement for individuals to provide at times complex, duplicated information to agencies that require the same PAYE information that Inland Revenue already collects. Under this proposal, PAYE information would only need to be provided to Inland Revenue, and Inland Revenue would then represent a single point of contact for PAYE information for taxpayers and other government agencies.

8.6 As sharing PAYE information improves timeliness and efficiency, there may be potential for lowering compliance costs and improving efficiency for businesses. Therefore, beyond service improvements, there are potential opportunities for administrative cost savings and efficiencies.

8.7 However, any changes regarding the use of personal information must be considered against individual privacy rights and Inland Revenue’s secrecy obligations. This consideration needs to be informed by people’s views on the balance of better service and a lower-cost public service against the proposal that income information Inland Revenue receives will, within limits, be given to other agencies, with resulting impacts on privacy.

The importance of privacy

8.8 Inland Revenue collects and holds different types of taxpayer information, including information about individuals as well as business and company information. The former is protected by Inland Revenue’s taxpayer secrecy obligations, as well as the principles in the Privacy Act 1993. This Act controls how agencies collect, use, store and give access to personal information. Almost every person or organisation that holds personal information is an “agency” – this includes government agencies, companies of all sizes, religious groups, schools and clubs.

8.9 The Privacy Act is primarily concerned with good personal information-handling practices. It sets out 12 information privacy principles which govern the collection, holding, use and disclosure of personal information and the assignment of unique identifiers. The Privacy Act also regulates the practice of information matching in the public sector through authorised information-matching programmes.

8.10 The Government recognises there may be concerns about accuracy, unauthorised access, and the use of personal information for other purposes. In moving to meet the objective of better value for money, the Government acknowledges that an individual’s privacy is important. To that end, any proposal to share information aims to encourage better use of individuals’ personal information, to deliver improved public services for them, while at the same time, safeguarding their personal privacy. The Government would not implement an information-sharing framework without clear benefits that would address the public’s concerns and that deliver tangible benefits to them.

8.11 The privacy rights of individuals and the use of an individual’s tax information – such as PAYE information – must be finely balanced. Privacy protection is an essential element of voluntary compliance. If an appropriate balance is not struck, this could not only affect the effective delivery of services, but could also undermine future compliance with the tax system.

Options for PAYE information in the future

Information-sharing framework

8.12 In developing a new framework for sharing PAYE information in the future, the Government considers that maintaining the integrity of the tax system and promoting voluntary compliance should always be overriding factors. The administration of the New Zealand tax system relies heavily on taxpayers’ voluntary compliance to operate effectively. For taxpayers to be willing to comply with the tax system, it is crucial that they have trust in Inland Revenue. In turn, to retain taxpayers’ trust in Inland Revenue, it is important that taxpayers’ information is not disclosed inappropriately.

8.13 The Government welcomes submissions on whether the proposed information-sharing framework outlined below strikes the appropriate balance between the effective use of PAYE information to deliver tangible benefits for individuals, while at the same time ensuring that current privacy and tax secrecy concerns are addressed.

Proposed framework for sharing PAYE information

8.14 PAYE information collected by Inland Revenue would be shared with other government agencies under the following framework:

Provision of existing PAYE information

1. PAYE information would only be shared with another government agency if:

the government agency seeking access to the information had the ability and the authority to collect that information in its own right; and
the information is available and already collected by Inland Revenue.

A case is made for sharing

2. Information should only be shared and able to be accessed by another government agency if the sharing of that information is not so highly sensitive that it would likely inhibit individuals from providing accurate information in the future.

And:

it is uneconomic for that government agency to collect the information themselves; or
there are clear and high compliance cost benefits to individuals, for that government agency to have access to the information collected by Inland Revenue.

Appropriate oversight

3. The final decision about whether Inland Revenue should share information with another government agency should rest with Cabinet, through an Order in Council. The Minister of Revenue and the Minister responsible for the department seeking access to the information, in consultation with the Privacy Commissioner, would prepare a joint report seeking Cabinet’s approval for Inland Revenue to share, and for the other government agency to have access to the PAYE information. The specific joint-purposes for which the information would be used would be included in the report, with a view to these purposes being included in the Order in Council to be approved by Cabinet.

8.15 This framework would represent a significant step towards meeting the Government’s objective of delivering a better, smarter public service while still respecting the value of individual privacy. Government agencies seeking access to Inland Revenue’s information would have to be already entitled to that information in their own right. Additionally, the framework recognises that Inland Revenue is able to collect PAYE information more efficiently and economically than other agencies. The proposed new technologies mean that the PAYE information Inland Revenue collects would be received on a more frequent and timely basis, and involve front-end validation so that the PAYE information received is accurate and reliable.

8.16 The Government recognises that the proposal outlined in this chapter would mean that PAYE information collected by Inland Revenue may not necessarily be used for the purpose for which it was originally collected. When an agency collects information, it informs individuals why their information is being collected and this consequently determines how information can be used and disclosed. As such, it is important that the purposes are specific and clearly stated.

8.17 Under these proposals, before any PAYE information is shared with or accessed by another government agency, the specific purposes for sharing the information would be clearly stated and widely publicised so that individuals to which the information sharing relates, know and are fully informed of the exact purpose for which their information is used. For example, the details surrounding information sharing would be readily available on each individual’s online PAYE workspace. It is also proposed that the specific purposes would be listed in an Order in Council and form part of Cabinet’s decision as to whether another government agency should have access to Inland Revenue’s PAYE information.

8.18 This means that the purposes for which Inland Revenue collects PAYE information, that subsequently will be shared, would change to a joint-agency purpose. Once the joint purposes have been set, information would be collected by Inland Revenue, and used by Inland Revenue and the other agency only for those specific and predetermined purposes. This means that PAYE information shared under this proposal would be limited to information collected from individuals after the joint purposes for collection have been set (prospective information), and would not include information Inland Revenue already held about individuals before joint purposes were determined.

8.19 Transparency and ensuring that the public is fully informed about the way their information will be handled is an important to protecting privacy. Additionally, the ability and right for individuals to access and correct information about themselves will not change under the proposals. Rather, the personalised online workspace for individuals would allow individuals to have greater access and control over their personal information.

8.20 The Government welcomes submissions on this aspect of the proposal, which would enable the purposes for collecting PAYE information to be changed to a joint-agency purpose (between Inland Revenue and MSD in the first instance).

8.21 The Government is particularly interested in gauging whether the public considers that this aspect of the proposal would provide individuals with more tailored and improved services across the public service (or more specifically, across Inland Revenue and MSD while still protecting the privacy of individuals).

The proposal to share PAYE information with MSD

8.22 The information-sharing framework proposed in this chapter would best be applied on an agency-by-agency basis. Therefore, by applying the framework in the first instance, and focusing on PAYE information, the Government considers that sharing PAYE information collected by Inland Revenue with MSD will provide significant benefits over the current information-matching regime, in terms of speed and accuracy for individuals and government, as well as administrative efficiency.

8.23 Under the proposals, Inland Revenue would only share PAYE information that is already available within its systems and collected from third parties (such as PAYE information collected from payroll intermediaries). Other information, such as additional audit intelligence information acquired under section 17 of the Tax Administration Act would not be shared. Additionally, Inland Revenue would not share any information with MSD if the provision of that information is inconsistent with Inland Revenue’s taxpayer secrecy obligations, or if it impacted on voluntary compliance. This means some relationship information, such as custodial information, would not be provided to MSD.

8.24 However, provided that MSD has the ability and authority to collect the information, the following PAYE information could be provided:

identity and location information such as name, gender, address, employer details, employment commencement and cessation dates; and
financial information such as income, tax paid, debt owed, entitlements and/or assistance received.

Benefits of the proposal

Paying the correct rate: The social assistance system is designed to respond to income needs and relies on accurate information. Recipients of benefits are required to report any changes in their income, and their benefit entitlements are adjusted accordingly. In practice, people tend to report their wages after they are received, sometimes months later, and with varying degrees of accuracy. The recipient’s benefit is adjusted in response to reported income, and is subsequently adjusted again when more accurate wage information is provided. This means there may be a considerable time lag from when wages are in hand to when the benefit is reduced, which may result in a benefit debt. If MSD has access to a beneficiary’s PAYE information, adjustments could be made without having to rely on the benefit recipient reporting correct income as it is earned. This would reduce benefit debt.

Granting assistance: There can be difficulties in establishing entitlement when an employer winds up a business and the employee does not keep wage information (for example, because the employee is initially confident of finding another job). Access to PAYE information – such as evidence on employment start and stop dates, and on rates of pay – would be useful in granting and cancelling entitlements.

Additionally, under the proposals, Inland Revenue’s PAYE information could be used by MSD for various other purposes (as appropriate), including:

avoiding fraud or evasion;
improving the cost efficiency of both departments by removing information duplication and improving accuracy and timeliness;
statistics and evaluative purposes; and
developing better targeted and effective policy.

Current information matching regime

8.25 Information matching is the current regime through which government agencies (such as Inland Revenue) exchange information with other government agencies and is often used by agencies as an auditing and verification function. Information matching generally involves comparing personal information from one set of records against personal information from another set of records, for the purpose of producing or verifying information (usually a name) about an identifiable individual, generally with the aim of finding records in both sets that belong to the same person. [1]

8.26 The current framework recognises that there are many reasons that government agencies may wish to share personal information. Information matching is an accepted, statutory mechanism for agencies to use when the information they have collected for one purpose is to be disclosed to another agency for a different purpose on a routine basis. The safeguards provided by information matching ensure that this erosion of an individual's privacy rights only takes place in an appropriately controlled, transparent environment. For example, requiring matches to be contained in primary legislation provides transparency and accountability.

8.27 The current regime provides a mechanism for information exchanges, and there are no limits to the number of records that can be matched in an information exchange. That is, information matching can provide a high degree of specificity by allowing one agency to access another agency’s information in order to look up an individual and also to identify clients as a whole.

8.28 Currently, information collected by Inland Revenue – such as, PAYE information – is matched with other government agencies under specific information matching agreements. Inland Revenue currently has eight information-matching agreements with MSD – five of these involve the disclosure of Inland Revenue-collected personal information. For Inland Revenue, these agreements are prescriptive and are focused on enforcement. The current information-matching regime does not require agreements to be focused on enforcement, and Inland Revenue could broaden its information matching activities to achieve more effective and efficient sharing of PAYE information.

8.29 Under this option, Inland Revenue could update its current information-matching programmes. Increasing the frequency in some instances, and adding new information matches when necessary could allow more efficient use of information. This option would mean that current PAYE information would continue to be exchanged under updated information-matching agreements. However, any new information exchange or matching initiative would require a new information-matching agreement. This would need to go through the process of legislative authorisation.

A better, smarter public service

8.30 Although the current information-matching regime is a proven mechanism for exchanging information, the Government considers that through more effective and efficient use of Inland Revenue’s PAYE information, there is scope to achieve better value for money from the public service within a limited increase in public funding.

8.31 As noted above, there are increasing expectations on the public service to deliver services that are both efficient and individually tailored. The proposed framework outlined in this chapter would allow, within limits, PAYE information collected by Inland Revenue to be freely accessible to other government agencies. Other agencies would then subsequently be able to use the Inland Revenue-collected income information to provide services to their customers. This means that in certain cases, an individual’s entitlements and obligations could be met without the individual having to provide the same information multiple times to different agencies as Inland Revenue would already have collected the information through the new electronic PAYE environment that is being proposed.

8.32 The Government recognises the importance of privacy and acknowledges that any framework that appears to depart from the Privacy Act must be thoroughly examined. The proposal that Inland Revenue-collected income information will, within limits, be given to other agencies has impacts on privacy. Although there is huge potential to make better use of personal information to deliver benefits to the public, this will be realised only if the public trusts the way the Government handles personal information. The Government has the responsibility to ensure that information available to it is used in the most efficient and effective way possible to achieve its goals. However, in doing so, it needs to adopt and develop a framework that is transparent and affects the privacy rights of individuals. Therefore, the Government welcomes submissions on any or all aspects of the information-sharing proposal.

1 The current information matching regime is regulated through part 10 and schedules 3 and 4 of the Privacy Act 1993.