3 - How Inland Revenue meets its stewardship obligations
- Inland Revenue’s strategic direction
- The Generic Tax Policy Process and tax policy work programme
- Regulatory impact analysis
- Policy impact assessment
- Connecting policy design and implementation
- Continuous improvement
- Business Transformation programme
- Accessible legislation
- Adjudication and Rulings
- Future steps
Inland Revenue has a number of mechanisms, tools and initiatives in place to meet its regulatory stewardship responsibilities. These allow us to take a proactive and collaborative approach to the on-going monitoring and care of those regulatory systems.
Inland Revenue’s corporate strategy is made up of six strands, which guide us in planning, making essential shifts and managing risks. These strands cover our customers, our people, our place in a digital world, external collaboration, policy agility, and information and intelligence. The external collaboration strand guides us in working with others inside and outside of government.
Being customer-centric means that we will help customers get it right from the start, this will improve the customer experience and reduce compliance cost and effort – so customers spend less time dealing with their tax and social policy obligations.
Policy agility is end-to-end policy that needs access to good information and insights to be more effective, responsive and evidence based. Improving our policy agility will mean that we are able to maintain our world class tax system in an increasingly complex and changing world.
Tax policy is developed using the Generic Tax Policy Process. This process is designed to ensure better, more effective tax policy development and implementation through early consideration of all aspects – and likely impacts on customers – of policy proposals. One of the main features of the process is built-in consultation with affected parties and other interested parties.
Consultation takes a variety of forms ranging from the release of a consultation document, to workshops to dialogue with the private sector through to co-design. Most importantly, one size does not fit all and the approach ultimately depends on the nature and extent of the policy change and who is affected.
The tax policy work programme, which is owned and agreed to by the Minister of Revenue and the Minister of Finance and is developed with the Treasury, is Inland Revenue’s plan for the development, management and delivery of legislative change. The highest priority improvements are reflected in the tax policy work programme, and include remedial changes and the routine regulatory updates we manage. We maintain a regulations register.
The Government tax policy work programme covers three broad areas:
- Inland Revenue’s Business Transformation programme, including Better Public Services;
- international tax and base erosion and profit shifting; and
- further improvements and enhancements to tax and social policy within the broad-base, low-rate (BBLR) policy framework.
See Section Five for more information on the Generic Tax Policy Process and the tax policy work programme. News and information about the tax policy work programme is available at www.taxpolicy.ird.govt.nz.
We have a panel of experienced analysts available to help policy staff meet the Government’s regulatory impact analysis requirements, and to conduct independent quality assurance reviews of regulatory impact assessments (where they are not reviewed by Treasury’s Regulatory Quality Team).
The panel assists policy staff with preparing regulatory impact assessments and national interest analysis’ (for tax treaties).
Where quality assurance reviews are carried out by Inland Revenue, two panel members not involved in the project will confirm whether the regulatory impact assessment meets the quality assurance criteria.
We also use external policy consultants to review the quality of our policy advice, to help us improve our processes and advice.
We have a formalised policy impact assessment process to ensure that policy advice is supported by realistic and well thought through advice on the implementation costs and benefits of a proposed change.
A specialised service design team determines whether or not a proposed change should be analysed for system impacts. When an analysis is undertaken it includes all parts of Inland Revenue that may be affected by the change. The policy impact analysis is signed off by the senior managers from each area that are involved in the analysis. This ensures that policy analysis appropriately reflects the implementation costs and risks when decisions are made. This also ensures that implementation colleagues fully understand pending change.
Since 2006, Inland Revenue has had a dedicated service design team (Government Solutions) working alongside the policy design team, fostering a customer focus from the start and strengthening policy design and implementation links. Having policy and service design officials working throughout the Generic Tax Policy Process creates a better outcome.
Engagement on the proposals to make provisional tax simpler and easy for business customers (in this case, small and medium enterprises), is a good example of co-design. It was clear from the outset that the simplest solution would be to incorporate provisional tax into the natural business cadence of business customers. To this end, software developers of the accounting packages used by business customers were invited to work alongside policy and design officials.
This arrangement enabled software developers to be involved in every step of the policy and design process, which involved testing of both policy and implementation options, and technical input into the draft legislation. In addition, working parties and an oversight group comprising private sector representatives were established to provide governance and guidance to the co-design team. The resulting outcome is an industry-led solution that will meet the needs of business customers.
An emphasis on continuous improvement is crucial for becoming an organisation using intelligence for providing services better targeted to our customers. There are three key areas of focus which are interlinked, each crucial to the effectiveness and sustainability of a continuous improvement culture. The areas of focus are:
- leadership thinking and behaviours that create and foster the culture, as reflected in Inland Revenue’s leadership dimensions;
- management systems to highlight, understand and deliver business performance; and
- the tools and technical capability to solve problems which deliver increased measurable value to our customers.
Over the past three years we have had a dedicated continuous improvement team with the main objectives of growing continuous capability and leading improvement initiatives that have delivered increased value to the customer.
We have seen over 130 frontline customer teams trained to solve problems in a structured way that add value to the customer. The outcome has been a self-sufficient business group that continue to identify and implement improvement initiatives, which results in on-going value being created for our customers.
Our multi-year, multi-stage Business Transformation programme is currently under way and reflects Inland Revenue’s acknowledgement that its processes and systems, and in some cases the legislation, limit its capability to meet the future requirements the Government may have of the tax system and the social policies Inland Revenue administers. We’re making it simpler, more open and certain for New Zealanders to pay their taxes and receive their entitlements. It is a once-in-a-generation opportunity to modernise New Zealand’s revenue system. The capability that is being developed through Business Transformation addresses the expectations of good regulatory practise, and will improve the agility of Inland Revenue to develop and implement the regulatory changes required by government.
See Section Five for more information.
Modernising the Tax Administration Act – case study
We are working to simplify and modernise the Tax Administration Act 1994 (TAA). The TAA centres on the rights and obligations of taxpayers, including the records that need to be kept, providing information, interpreting the law and reconciling any different interpretation by Inland Revenue, assessing and amending liabilities, paying and filing on time, and penalties arising from default. The current tax administration system in New Zealand relies heavily on primary legislation, as predominately reflected in the TAA. This means the rules are slow to adapt, and inflexible for different types of taxpayers.
Our proposals released in December 2016 for consultation, include potential changes to the role of the Commissioner and design of a new TAA. They are:
- Extending the care and management provision to allow the Commissioner some greater administrative flexibility in limited circumstances.
- Allowing a greater use of regulations for tax administration, including:
- allowing for a more tailored approach to different types of taxpayers; and
- allowing trials of tax administration processes to be carried out.
- Amending the structure of the TAA to reflect the modernised tax administration, including basing the Act around core provisions.
- Moving to a more hierarchical approach to drafting the TAA, including a greater use of principles when appropriate.
We are currently actively working with the Parliamentary Counsel Office (PCO) on the Access to Subordinate Instruments Project. Inland Revenue and the PCO have, so far, analysed the main Revenue Acts and identified potential subordinate instruments that may be legislative in nature and that may appropriately fall within the project. Once these provisions have been further reviewed and finalised, we will be looking at the need (and potential timing) for affected legislation to be confirmed and published on the New Zealand Legislation website.
We are active in the Government Regulatory Practice Initiative, which is a network of government regulatory agencies that lead and contribute to regulatory practice initiatives. With this network we improve leadership, culture, regulatory practice and workforce capability in regulatory organisations and systems.
Compliance for Inland Revenue is when customers pay the taxes and get the entitlements they should.
Our compliance model helps us understand our customers better. The more we understand customer needs and behaviours, the better we can tailor our actions to facilitate compliance. The compliance model shows us what makes up customer behaviour and provides a set of principles to help tailor the activities we use.
Customer behaviour is more than attitude. A combination of capability, opportunity and motivation make up compliance behaviour – we can be more proactive and use different approaches to help customers comply.
Right from the start
As Inland Revenue transforms, we are changing how we work with customers. We are shifting our compliance approach to be more proactive and make it simpler and more certain for customers. We want to help customers get it right from the start, rather than correcting them when they get it wrong.
Strategic direction for compliance
Our approach to customers is increasingly flexible and adaptive. We understand more about outside factors that influence compliance, such as social marketing and system design. We want to give our customers certainty with the least number of interactions and we want our customer connections to be correct the first time. And we will be able to appeal to different customer groups in ways they can relate to.
The Office of the Chief Tax Counsel produces public statements on particular tax or social policy issues of interpretative uncertainty. These statements assist compliance by providing certainty and predictability to external tax advisers (our primary audience), taxpayers and internal staff. Our aim is to ensure that Inland Revenue provides legally accurate and consistent guidance. We consult on our items both internally and externally before finalising them.
The Office of the Chief Tax Counsel is responsible for the taxpayer rulings process. Taxpayer rulings are binding rulings that apply to a specific taxpayer or transaction, in particular private rulings and product rulings. Taxpayer rulings also include certain advance pricing agreements (APAs), status rulings and financial arrangements determinations.
The Office of the Chief Tax Counsel acts as the final step in Inland Revenue's formal disputes resolution process before possible litigation. The key function is to take a fresh look at a dispute, providing an independent and impartial decision on the issues in the dispute. This role involves impartially considering the correct legal position after comprehensive research and analysis of the law.
Information from our compliance and adjudication and rulings work is used to identify problems and loopholes in current systems.
Inland Revenue publishes Tax Information Bulletins which include information about changes to tax-related legislation, proposed legislation, judgements, rulings and other specialist tax topics. Inland Revenue provides these bulletins as a service to people with an interest in New Zealand taxation.
We will publish a revised regulatory stewardship strategy once Ministers confirm the next tax policy work programme after the 2017 general election. The programme is published online as soon as it is agreed. Our stakeholders are involved in the consultation process when we renew or update the published programme every 18 months.