The Government has released two discussion papers to engage in public consultation on options for simplifying and modernising New Zealand’s tax system. The documents introduce taxpayers to the general direction the Government intends to take to improve administration of the tax system.
Basically, the Government wants to simplify tax for individuals and businesses by reducing compliance costs, and making interactions with the IRD faster, more accurate and convenient with a greater use of electronic and online processes. As the IRD puts it, “tax obligations should be easy to comply with and hard to get wrong”.
The first discussion paper ‘Making tax simpler – A Government green paper on tax administration’ outlines the overall direction of the tax administration modernisation programme. Key elements of potential change include:
- Simplifying tax for businesses, for example by streamlining the collection of PAYE, GST and other withholding taxes and integrating these obligations into business processes. Options will be investigated for simplifying the calculation of provisional tax – with more emphasis on real time information, together with payment options that better reflect taxpayer’s cash flows.
- Simplifying tax for individuals by providing online income tax statements for individuals pre-populated with income details, so that all that would be required is to ‘check and confirm’. Technology will be used more effectively to better manage both overpayments and underpayments of tax.
- Social policy objectives would be met by using information that the IRD or the Government already holds, providing for timely payments on a more real-time basis, resulting in certainty for individuals and families. With faster, more accurate information, there should be less chance of people receiving too much and going into debt.
The IRD wants to make tax obligations part of the normal day-to-day business processes, making it quick, easy and harder to get things wrong.
Consultation closed on 29 May 2015.
The second discussion document ‘Making tax simpler – Better digital services’ outlines proposals for greater use of electronic and online processes. In particular the discussion document considers whether secure digital services can be delivered using the current policy and legislative framework and discusses options to move people to digital services, these include:
- The IRD working with third parties such as banks and business software developers so that tax interactions are built into a customer’s regular transactions rather than managing tax separately at specific times of the year.
- Non-digital services will need to be provided for those who still cannot use digital services.
- A process would be developed for moving to a digital format those who could potentially use digital systems for some services – in circumstances where there would be wider benefits accrued.
Consultation closed on 15 May 2015.
These are the first two releases in a series of public consultations designed to modernise and simplify the tax system. Further discussion documents will be released over the next two years and public feedback is requested.
The significance of this process can’t be overstated. In an age where changes in lifestyle as a result of technology have moved at an explosive rate, the design, administration and technology associated with our tax system have not kept up.