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Inland Revenue

Tax Policy

Chapter 5 – Data

5.1 In a digital world, data is important. Sharing and re-using data can create efficiency gains as data is accessed or collected in more automated ways or productivity gains as more ready access to data enables new products and services to be developed.

5.2 Two issues come to the fore. What data is collected and how it is managed.

Data collection

5.3 Data collection is at the heart of tax collection. Inland Revenue is rethinking its approach to the data it collects and accesses.

5.4 Previously, access to data meant physical collection and storage. In a digital world, this will still be the case for much of the data that Inland Revenue needs. But, in some cases, it might be as practical and efficient for Inland Revenue to access data without the need to hold it. This question – whether data needs to be collected or whether it can be accessed, is within the frameworks that Inland Revenue is adopting to guide its approach to data.

5.5 These frameworks will continue to emphasise that the provision of required data is compulsory. Where possible, however, provision of that data should be simple for taxpayers to comply with – for example by focusing on existing financial information and where data is generated in digital channels using natural systems.

5.6 Inland Revenue has traditionally collected less data than comparable tax administrations. In the main, the focus has been on what data is needed for compliance rather than other purposes such as tax policy. A recent legislative amendment reinforced Inland Revenue’s ability to collect data that relates to developing policy or reform of the tax system. Sometimes, this will lead to collection of additional data.

5.7 In other areas, for example relating to the data taxpayers supply as part of their tax return, there could be rationalisation of what is collected. External parties have suggested there is scope to simplify what is collected in ways that improve its usefulness. Work in this area will also address the format in which the data is provided.

Sharing data

5.8 Traditionally, the law in New Zealand (similar to many other tax jurisdictions) has required Inland Revenue to hold important tax data (classified as sensitive revenue information in the Tax Administration Act) as confidential and not disclose it to external parties. This constraint is imposed on Inland Revenue; unlike the Privacy Act this obligation does not sit within an overarching framework where the customer or taxpayer has control over their data.

5.9 The approach is based on balancing the powers Inland Revenue has to obtain information, with responsibilities to keep that data confidential.

5.10 The approach has exceptions. There are legislative dispensations so that Inland Revenue can share data with other government agencies for social policy or enforcement purposes, where doing so will assist tax revenue collection, or if it is sharing the taxpayer’s data directly with the taxpayer or the taxpayer’s agent.

Data sharing with taxpayer consent

5.11 The question that now arises is whether Inland Revenue could share data with a non-government third party, where the taxpayer consents. Possible examples could include:

  • when customers enrol with a financial institution, they may want Inland Revenue to share their identity data
  • when applying for a loan, taxpayers may want Inland Revenue to share their income data, and
  • taxpayers who are receiving budgeting advice may want Inland Revenue to share data about tax debts or upcoming tax payments.

5.12 Moving in the direction of enabling taxpayers to share their data more widely is consistent with the Government’s policy to implement a new legislative framework for a consumer data right. (Legislation is planned for 2022.) The essence of this policy is to allow consumers to securely share data that is held about them with trusted third parties, using standardised data formats and interfaces. Security and privacy of consumer data will be addressed in this policy and will provide guidance for Inland Revenue’s approach.

5.13 Any consideration of this issue points to consent being a fundamental element. Ensuring that consent is robust - that the person granting it understands the consequences of their consenting - is important both for any new areas of data sharing and, where applicable, existing areas of data sharing.

5.14 Inland Revenue has conducted research to better understand taxpayer attitudes to data sharing. The research suggests that taxpayers are comfortable about consenting to Inland Revenue sharing their data with external parties as long as:

  • the benefit is clear and understandable
  • the taxpayer feels in control of consent, and
  • there is trust in Inland Revenue and the third party.

5.15 From Inland Revenue’s perspective, there would also need to be safeguards so that any data sharing did not undermine taxpayers’ trust in Inland Revenue as a steward of their data and manager of the tax system. For example, these points would need to be considered:

  • Does the sharing of data, subject to taxpayer authorisation, align with ideas that are important for Māori?
  • The supply of the information to the third party will not damage the integrity of the tax system. Factors would include the intended use of the data and the ability of the receiving entity to satisfy security and privacy requirements.
  • The benefits to New Zealand of sharing outweigh the costs (there could be costs to Inland Revenue in meeting these requests).

5.16 Our current thought is that Inland Revenue would not charge for the data it shares, even if the data sharing were part of a commercial product or service. However, we are aware of different views on this and therefore are keen to explore it further.

Sharing statistical (anonymised) data

5.17 A different aspect of data sharing could be where statistical (therefore anonymised) information is made available by Inland Revenue to taxpayers or representative bodies. This could improve the quality of information available to external parties which can help research and decision making. A possible example of this would be enabling an iwi to see patterns amongst members with respect to average incomes or receipt of benefits.

Publishing debt data

5.18 Where tax debt is unpaid, particularly PAYE and GST which is collected on behalf of others, it can be a sign of a business under stress. This can be useful information for other businesses and enable them to make informed credit decisions. This could lead to wider economic benefits, for instance preventing a cascade of business failures when one business fails.

5.19 Inland Revenue already has a limited ability to share names of debtors with credit agencies. This sits as an exception to the principle of only sharing data with taxpayer consent. The Government has asked officials from the Ministry of Business, Innovation and Employment and Inland Revenue to undertake policy development to improve the availability of tax debt information.[12][13]

Questions for submitters

  • How do you view the concept of sharing sensitive revenue information, subject to taxpayers’ consent?
  • Do you have other examples of how data sharing could be applied beyond the tax system?
  • What do you consider are important elements in a consent framework for data sharing?
  • Do you agree making tax debt data more available, with controls, will have a significant positive benefit for the wider business community?
  • Do you agree with the proposal to make more statistical (not individual) income and administrative information to wider groups, such as iwi or social groups?