Speech: Dunne - Tax Agents Institute of New Zealand
Hon Peter Dunne
Minister of
Revenue
Speech
Opening
Address to
Tax Agents Institute of New
Zealand
Annual
Conference
Copthorne Hotel, Waitangi
1pm, Friday, 9 March 2012
Good afternoon, and thank you very much for inviting me to speak to you again.
Looking back over the past year, much has
changed since the last time I addressed you, but also a
great deal still remains to be done.
As we contemplate
the uncertainty ahead for both New Zealand’s and the
world’s economies, one thing is certain – the old ways
are gone forever and we need to find ways to be more
innovative if we are to map out the kind of future that we
want for this country.
And the events of the recent past have certainly caused massive upheaval.
When I attended your conference in March last year, Christchurch was only just coming to terms with the most destructive earthquake in living memory the month before.
February 22 changed everything for Canterbury and for New Zealand.
We have just marked the first anniversary of the quake, and Christchurch and the nation are still feeling the on-going effects and will be for some time to come.
The 2008 Global Financial Crisis
changed our world forever.
Easy acceptance of massive
debt changed almost overnight and now governments, business
and individuals alike are much more focused on fiscal
prudence.
If we are to ride out future economic shocks,
we urgently need to reduce our dependence on overseas debt,
build our capital and return the economy to surplus as soon
as possible.
A sound tax system is a good platform for
the Government to begin consolidating and strengthening the
economy and getting on with rebuilding Christchurch.
The
GFC and the Canterbury quakes have taught us, amongst other
things that we as a people need to be more prepared and more
agile.
They have forced us to consider new ways to work
more efficiently, and this, essentially, is what I want to
talk to you about today.
Work
programme
Later this month I will release fuller
details of the tax policy work programme for the next
eighteen months.
The programme will be strongly focused
on helping us return to surplus and building our
economy.
It aims to do this, not by introducing new tax
regimes, but through some might say mundane, but sensible
measures which align neatly with the Government’s
priorities as outlined in the Prime Minister’s start of
year speech:
• The responsible management of
Government’s finances
• Building a more competitive
and productive economy
• Delivering better public
services to New Zealanders, within the tight budget the
Government is operating under, and
• rebuilding
Christchurch.
Obviously to do these things in an
environment of strict fiscal restraint and without borrowing
further, we need to raise revenue to fund government
services and functions.
Now there are all manner of
strange and wonderful new taxes that could be introduced to
raise revenue if that was our only objective.
We are not
doing that.
What we are doing is working with the
system we have, which is in pretty good shape after the
reforms of Budget 2010, and ensuring that the tax burden is
shared equally and that the current rules are working as
intended.
The focus is on constantly making the system
work better.
It is the sensible thing to do and we need
to be sensible if we are to have an enduring, robust economy
and help Christchurch.
And speaking of Christchurch,
work continues in this area on the tax front, mainly with
regard to depreciation.
The tax system has been able to
provide tangible and valuable help for the people of
Christchurch.
Most recently was the further extending of
Inland Revenue’s discretion to remit interest on late
payments where people are unable to meet their tax
obligations because of the earthquake.
For this support
to continue and to provide government services across New
Zealand, it is crucial that tax collection continues, but
that it does so in an efficient and fair manner.
Along
with raising revenue, the work programme will also include
work to:
• Provide an environment that supports
economic efficiency and growth;
• Minimise tax
administration costs and compliance costs for
taxpayers;
• Provide on-going maintenance work on the
tax system to ensure its effectiveness; and
• Provide
capacity (and flexibility) to deal with emerging and
critical issues.
Public service
efficiency
Another thing we learned from the
Canterbury earthquakes is that government agencies can be
very flexible and find new ways to work if need be.
So for example, we found courts being convened on marae and different agencies, such as Work and Income and Inland Revenue working together to provide frontline services to those in need.
That spirit of the public service working more cohesively together is to be encouraged and the Taxation (Tax Administration and Remedial Matters) Act passed last year provides for greater sharing of information held by Inland Revenue with other government agencies, subject to a range of restrictions.
It makes little sense that a person dealing with a number of different agencies has to provide the same basic information to each agency.
Sharing information is therefore a rational and efficient way for the public to interact with the public service.
There is a cost to collecting taxes, a cost which of course is borne by the taxpayer, so anything which reduces Inland Revenue’s costs is good for the taxpayer.
Inland Revenue’s business
transformation
And currently, Inland Revenue’s
technology systems are ageing and our ability to implement
complex or major policy change is declining over time
.
In the last few years it has become increasingly
apparent that a system designed well before the advent of
the internet and e-services has become a significant
challenge to the efficiency of our tax
administration.
More so because of the very constrained
fiscal situation
Inland Revenue’s FIRST system,
originally intended for the efficient administration of tax
has over recent years, has also been used to administer a
great many non-tax programmes such as student loans, Child
Support and KiwiSaver.
This has resulted in greater
systems complexity, loss of agility and efficiency, and
increased administration costs.
The combination of new
technology and rapid changes in Inland Revenue's role means
we cannot rely on more of the same to work for us in the
future, hence the need for a transformation of our systems
to continue to ensure the efficient operation of our tax
system into the future.
The economic and fiscal position
calls for a tax system that is as efficient as possible in
raising the revenue the Government needs to meet its funding
requirements.
Work in this area is currently being
progressed with an expectation of a fuller understanding of
its scope by mid-year.
Electronic
filing
I have also had an
on-going interest in seeing a reduction in the amount of
paper generated through correspondence with Inland Revenue.
I am therefore heartened by the way that you as tax agents have taken to electronic services and I congratulate you on that.
It is a win-win as far as I can see
— good for your clients and your business as well as being
good for the public service.
More work is being done in
this area and a Bill currently before the House contains
proposals you may be aware of which, broadly speaking,
smooth the way for electronic storage of business
records.
The objectives of the proposals are to
support employers currently working in an electronic
environment and reduce compliance costs for employers in
meeting their filing and record keeping obligations.
Fairness
Perhaps the greatest
strength of the New Zealand tax system is that not only is
it a broad based, low rate system, but it is one that is
comparatively simple.
Tax, almost by definition, is
complex, but our system makes intuitive sense.
Work
continues on reducing complexity, improving fairness and
maintaining the integrity of the tax system.
Anything
which simplifies the tax system is a good thing.
Both the
courts and Inland Revenue have made it clear that businesses
are free to use company and trust structures – as long as
these are not used in an artificial and contrived manner to
defeat tax law.
Inland Revenue has again emphasised that
it will focus only on the most serious and artificial cases,
which is a very pragmatic approach in my view.
Of course
the changes in Budget 2010 have gone a long way to
preventing the opportunity for such cases to arise by
aligning the top personal and trustee tax
rates.
Preventing debt and promoting return
filing
And as we all know, prevention is better
than cure.
Inland Revenue has therefore been active in
preventing debt and taking proactive action to help minimise
penalties and interest.
Contacting customers over the
phone soon after they get into debt has seen Inland Revenue
collect an extra $115.3 million, as of 30 June last year,
against a target of $100 million.
Last year’s February
7 campaign involving letters, text messages and phone calls
promoting the payment deadline, saw 11 per cent more
customers paying on time than was achieved the year
before.
The actual figures were 83 per cent; up from 72
per cent in 2010.
This is a good example of working
smarter.
And the Department is working to improve on that
this year.
Inland Revenue recognises and appreciates the
hard work you do in supporting your clients to:
• avoid
unnecessary penalties and interest by meeting their
obligations, or
• get back on track quickly if they
have missed a filing or payment deadline.
Conclusion
So to sum up, I would
like to say that the way ahead for the global and the New
Zealand economy is uncertain but we have learned the lessons
of the past and our economy and tax system are now better
equipped to deal with economic turmoil.
Government can
help to grow the economy, and through our tax system, we can
help provide the environment and factors which nurture and
sustain a growing economy.
We are confident that our tax
system is in good shape after the Budget 2010 reforms and
the way that tax shelter opportunities have been minimised.
The tax policy work programme for the next eighteen
months is based on sound policy that aims to make our tax
system more efficient and fairer.
What we will be looking
to do is work smarter – to do more with what we
have.
Thank you
ENDS