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Inland Revenue

Tax Policy

Chapter 5 - Ensuring digital services meet everyone's needs

SMEs are usually run by a single owner or small number of individuals who do everything for their business. Research conducted for the Government indicated that many SMEs wanted to be able to interact with government outside normal business hours.

Large corporates often have “bespoke” accounting systems and require considerable notice to make changes.

In the 2012 international comparison report by the Worldwide Internet Project, New Zealand (85.4%) was ranked as a country where access to the internet was high, along with Australia (86.8%), Sweden (85.6%) and Canada (84.1%).

The following discussion starts from the assumption that digital tax services will be designed and operated to be secure and reliable, and based on best practice standards. But developing and providing secure, reliable digital services does not mean that people will use them.

This chapter proposes a number of principles to guide the development of digital services so that the benefits identified in Chapter 3 will be realised.


Designing services to meet customers’ needs is critical to realising the benefits.

A fundamental objective of a new tax administration system is high quality user-friendly tax services – either delivered by Inland Revenue or by a third party.

Each of the following principles addresses a different aspect of this overriding principle.


Customers vary

New Zealand businesses and individuals are diverse. When developing digital services, it is important that Inland Revenue understands and reflects this diversity.

Inland Revenue segments its customer base by demographic factors, such as individuals and families; small and medium enterprises (SMEs) and corporates, and the nature of the service they use, such as student loan borrowers. It also has important relationships with third parties such as tax intermediaries and software developers.

Types of interaction

People interact with the tax administration system for different reasons and typically have different preferences on how the interaction is handled, depending on the nature of interaction. Within a business, different people may be responsible for different interactions, and have different preferences – eg digital, telephone, in person or in writing.

To meet people’s needs, it is important these preferences are understood and that customers are offered the channel of communication that best suits their needs. As far as possible, the underlying systems should be flexible enough to accommodate customer preferences and technology changes.

The Government’s rural broadband initiative aims to connect 86% of rural homes and businesses with broadband at peak speeds of at least 5 mbps by 2016. Before the initiative began in 2011 only 20% of the rural popula- tion enjoyed access at this speed.

According to Kiwis Count Survey on New Zealanders' satisfaction with public services in August 2013, the majority (83%) of New Zealanders consider that if digital access to public services was simple and user-friendly it would encourage them to use the internet to access those public services.

The environment will continue to change

Creating a comprehensive set of digital services at a fixed point in time will not be sufficient to ensure customers’ needs are met. Technology evolves constantly – for example, internet over mobile networks is a relatively recent innovation, and mobile eftpos terminals are even more recent.

Change will also take place in business practice and in the way individuals organise their lives – in some instances as a result of technology, sometimes as a result of other factors.

In order to deliver digital services which have the customer at the centre, Inland Revenue will need to constantly evaluate emerging, maturing and declining technology and activity in the business sector and the individual customer sector, consider what new needs might emerge for digital services, and what new digital services become possible.


The tax administration system is based on voluntary compliance; the idea that customers understand what they should do and do it. For voluntary compliance to work the tax administration system needs to feel fair, relatively simple and easy so that customers feel supported in meeting their tax obligations. The tax system is also used to deliver various social policy entitlements – Working for Families tax credits, paid parental leave, and child support. It is vital that those who benefit from these entitlements are able to interact with the tax administration system.

The term “digital divide” is used to describe the inequality which results from parts of the population not having access to information and communication technology. This exists in New Zealand but is relatively small in an international context. From available research, approximately 8% of the individuals surveyed did not have access to internet in 2013.

Socioeconomic factors, and New Zealand’s challenging geography, which limits access to broadband in some rural areas, are factors which can prevent internet access.

Inability to use digital services does not solely arise from lack of access. Even for customers who have internet access the level of digital readiness can differ. Some customers will lack the skills, knowledge or confidence to interact with government digitally.

Others may prefer and trust what they know and see no reason to change.

Customer inclination has been described as ranging from “innovators and early adopters” at one end to “laggards” at the other. While research suggests that good customer-centred design is the most important factor in determining uptake, support and assistance for customers must be part of any future services design.

The Government is committed to ensuring that modernising the tax administration system will also help voluntary compliance and people’s ability to access their social policy entitlements. It is critical that the introduction of digital services does not result in some people who comply with their tax obligations now not complying in the future, or make it more difficult for people to access their social policy entitlements. Because these objectives are key, where necessary assistance will be provided to help people to access digital services, and if they are unable to use a digital service they will not be prevented from complying with their tax obligations or accessing their social policy entitlements.


Administrative costs still reflect significant use of non-digital channels.

In 2013 Inland Revenue issued approximately 25 million paper items, at a cost of approximately $18 million. These items include returns, letters, forms, statements and notices. In 2013-2014 Inland Revenue handled over 4 million assisted (not automated) phone calls.

The benefits set out in Chapter 3 include reducing compliance costs and reducing the cost of administering the tax system. Who bears the costs and the costs of the changes need to be carefully considered before changes are made.

Compliance costs

Customers decide how to interact with the tax administration system, based on their skills, knowledge, inclinations and the benefits and costs they bear. Costs borne by business and other customers in dealing with the tax administration system are known as “compliance costs”.

The Government has set a target of cutting the costs to business when dealing with government by 25% by 2017. Changes to the way the tax system is administered are expected to significantly contribute to this cost reduction.

Administrative costs

Customers decide how to interact with the tax administration system based on their own costs and preferences. They do not factor in the costs of administering the tax system, such as the fact that it is more expensive to process a paper return than an electronic one. These costs are borne by society as a whole.

Outside the tax system, some private-sector businesses address the problem by imposing charges on customers who continue to use non-digital services after a digital alternative has been made available.

In modernising the tax administration system, the Government needs to ensure that the benefits to society (taxpayers) as a whole from reduced administrative costs are appropriately considered. The next chapter looks at how this might be achieved.


Diagram of the principles for developing digital services


  1. Do you agree that these principles are important when considering how greater use of digital technology might benefit all those who use the tax administration system?
  2. Are there any other principles which ought to be taken into account?