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Inland Revenue

Tax Policy

Foreward from the Ministers

New Zealand has a very good tax and social policy delivery system.

Taxes are required to finance the government services that New Zealanders expect. They are an important part of a good and inclusive society. At the same time they impose costs which should be kept to a minimum. It is also important that taxes are fair and seen to be fair.

New Zealand came through the recession in good shape and the strength of the tax system played an important part in that. We need to ensure that we continue to be well placed to weather any future economic storms on the domestic or international fronts.

Our tax system works on the principle of voluntary compliance, and the vast majority of people do the right thing and comply with their tax obligations. That’s largely because our tax system is reasonably fair and coherent.

A good tax system is good tax policy supported by good administration of tax laws. New Zealand is served well by its broad-based, low-rate tax settings. Our broad bases help make our tax system less distorting. Our relatively simple and coherent tax system also helps keep costs to taxpayers in complying with the tax system and costs to the government in administering the tax system, relatively low.

But the tax administration system reflects incremental decisions that have been made over many years. We can and must do better.

We want to cut the costs to taxpayers of complying with the tax system and to the government of administering the tax system without making things more distorting.

Some people are unsure about how best to comply with the tax system and we want to make it easier for them.

We want businesses to be able to focus on running their businesses with tax as a secondary consideration. We want it to be more difficult for people to fall into overdue debt and easier for them to manage their tax payments. We want people and resources at Inland Revenue to be focused on outcomes rather than low-value tasks. We want to boost overall levels of compliance so everyone is paying their fair share of tax. Tax obligations should be easy to comply with and hard to get wrong. Greater use of electronic and internet-based technology is a key enabler to achieve these objectives.

Achieving high levels of compliance will be of greater and greater importance in the future as New Zealand’s population ages.

In making these changes, we will have to manage very carefully the cumulative impact on businesses and other customers.

This Green paper sets out the Government’s initial thinking about a possible future for our tax administration.

We want your thoughts because it’s your tax system too. Inland Revenue is the government department that New Zealanders deal with most often, not just on tax matters, but for a range of other services as well. Inland Revenue has responsibility for administering Child Support, Student Loan repayments, Working for Families and KiwiSaver. Furthermore a number of other agencies, such as ACC and MSD, use tax-related information to deliver their services.

Whether the tax system benefits you indirectly through taxpayer-funded services or through its contribution to the economy, or you benefit directly through social policies such as Working for Families, today’s tax system is a part of all of our lives. We all benefit from its smooth running so it’s important that we all consider for ourselves what kind of tax administration we want.

We want your views on whether the ideas outlined in this Green paper are heading in the right direction and that we are focused on the right things, before more work is done. It’s important for all New Zealanders to have their say because this is an opportunity to help set the priorities for change, and shape the way we administer the tax system.

Over the next few years, you’ll see detailed proposals about different aspects of tax administration. The programme of work is very ambitious. We look forward to receiving your views.

Hon Bill English

Hon Todd McClay