New Zealand’s Inland Revenue targets tax compliance burden

This article was current at the time of publication.

With a long list of priorities, there’s little doubt 2021 will be another challenging year for the New Zealand Inland Revenue Department (IRD).

First and foremost will be the IRD’s ongoing role in supporting New Zealand’s businesses and citizens through the next stages of dealing with COVID-19. Potential government changes to tax policy are also on its agenda.

Then there’s the expected completion of its massive business transformation program, with an upgrade to New Zealand’s new online tax system earmarked for October this year.

“For tax agents, that’s going to be an important thing to look out for towards the end of the year,” says IRD commissioner and chief executive Naomi Ferguson.

“The upgrade will change some of the look and feel and it will deal with some of the things that have been a bit annoying since the new system has gone in.

“As we’ve done with every release where there are changes that impact tax agents, we will continue to work closely with professional bodies and other representatives from the tax agent community, including CPA Australia.

“We will also provide regular updates directly to tax agents and broader reminders through our website and social media channels.” 

There will be several webinars that tax agents can join nearer the time that will give them specific details of what’s changing in the upgrade.

“As always, they can call on support from their IRD agent account managers,” she adds.

COVID and monitoring tax compliance

Ferguson says that with the COVID-19 pandemic having different impacts across the country’s economy, the IRD is continuing to work with struggling businesses to help them get through.

“For us, compliance is about really helping business customers through this and getting compliance right from the start – not waiting until something goes wrong before we contact them or before we try to understand what’s happening,” she says.

Ferguson also notes that the IRD has “incredibly good tools” to support compliance. 

“We’re seeing the value of some of the analytical capabilities we’ve put in to help identify very early where something looks wrong and to be able to work with tax agents and their clients to find the right way to get that fixed.

“Our preference would always be to find a way to do that quickly and easily to stop the need for a full investigation and audit.”

Reducing the compliance burden

One of the key focus areas of the IRD – part of its whole business transformation program, and the rollout of its new online systems – has been reducing the compliance burden for both tax agents and taxpayers.

“We know that the upgrade of the system with policy and process changes has reduced the burden on customers, particularly small-to-medium enterprises [SMEs],” Ferguson says, adding that the regulator will continue to work with the taxation community to identify areas where more can be done.

“We are hoping that during 2021 we will produce a green paper with a potential further legislative change in the administrative area that would allow us to leverage the new systems that we’ve put in place and the new analytical capabilities so we can continue to reduce the burden further.”

She also notes that changes can be made within existing legislation and is interested to hear from CPA Australia and its New Zealand members about other key areas on which to focus. 

Protecting consumers and improving advice

Ferguson agrees that as businesses navigate the impacts of the pandemic and the many tax relief initiatives that were introduced this last year, it is important to better protect consumers of tax services and improve the quality of advice.

“We are doing some work internally to start to think about the provision of tax advice through tax agents and what sort of requirements and onboarding would be appropriate in the world we’re in at the moment.” 

It’s about understanding how the profession continues to change and develop its standards, she maintains.

“What’s the appropriate level of support and advice that we should expect from tax agents is something we will be thinking about and talking with CPA Australia about during this year.”

Relationships with agents and professional bodies

The commissioner is very keen to work closely with CPA Australia and its members to ensure continuing high standards in the accounting profession.

“We value the professionalism of tax agents and CPA Australia members within that community,” Ferguson says.

“It’s an important part of the jigsaw for us to have really good relationships with the tax agent community. I value the ethics and the quality of training and professional standards applied by CPA Australia members.”

Ferguson says it’s fortunate there is “quite a lot” of open engagement with the wider community in New Zealand when it comes to garnering insights into tax policy development.

“In the operational area we have a range of engagements and forums with tax agent networks and our tax agents’ issues resolution team is always working with account managers and the tax agent community to accurately understand the impact of issues [as they arise].”

The IRD established a tax agent cohort in early 2020 to work with it more closely on continuous improvement of services, with Generate Accounting Group managing director Angus Ogilvie recently appointed as CPA Australia’s representative.

Minimising information duplication

Ferguson says an area of continued focus for the IRD is ensuring minimal duplication of information coming from the department to tax agents and taxpayers.

She notes that one of the key challenges is that not every agent has the same relationship with their clients.

“It’s an area that will continue to change, and it’s something that through the tax agent cohort and the tax agent engagement groups that we need to keep understanding – just how business models are changing and what that might mean for services.

“But for me, it’s really important that a tax agent is in the system and supported by us to work with their clients. We’re not trying to get in the way of the relationship between a tax agent and their clients, and I [highly] value the role tax agents play.”