NZ To Simplify Tax System

by Mary Swire, Tax-News.com, Hong Kong

10 June 2010

New Zealand’s Finance Minister, Bill English, and Revenue Minister, Peter Dunne, have announced that the government is seeking public feedback on proposed changes to simplify the tax system and make it easier for people to manage their tax affairs.

Proposed ways of simplifying the PAYE (pay as you earn) system and income tax returns for individuals and employers are included in a discussion document, ‘Making Tax Easier’, and an accompanying online forum. The forum includes short videos which show the current position and a possible future for interactions with the Inland Revenue Department (IRD).

"Budget 2010 introduced a major rebalancing of the tax system away from consumption towards saving and investment,” English said. “The government is now looking to reform the way our tax system is administered to make it easier and more certain for taxpayers to manage their tax obligations.”

“The proposed changes also set out how people could self-manage most of their tax and social assistance entitlements such as Working for Families, using their own secure area on Inland Revenue's website,” Dunne added. "This would be done much like internet banking, making the whole process easier, faster and more certain for taxpayers."

"At the same time, the government wants to ensure that the tax administration system operates efficiently and delivers value for money,” Dunne continued. "The online consultation forum proposes several ways this might be achieved. The main idea is to shift the current emphasis of the IRD away from paper-based systems towards greater use of customer-focused online technologies.”

To further simplify and reduce the number of interactions that individuals must have with Inland Revenue, a new approach is being proposed, which for some people would mean PAYE would be treated as a final tax.

“More timely and correct information would mean that tax is deducted at the right tax code each pay-day, so there would be a reduced need for an end-of-year square-up,” he proposed. “This would give people greater confidence that the amount of tax they pay throughout the year is correct, with no unexpected tax bills arising at the end of the year."

For businesses, including employers and the not-for-profit sector, PAYE tasks such as filing an employer monthly schedule could be managed by software that automatically communicates with the IRD. The government is raising for discussion whether mandating the use of electronic communication is acceptable and, if so, when.

"Such a move towards electronic technologies would require all businesses to eventually move to electronic filing,” English noted. "The government wants to hear from employers and businesses on these proposals."

The proposals also envisage a new or expanded role for specialist tax businesses to reduce costs for taxpayers and the IRD, and new opportunities provided by technology. The government wants to hear from the software development industry on how strategic partnerships might be developed to create the tools to help employers move to an electronic environment.

There are also proposed changes to the rules around privacy of information. A new framework is being proposed for sharing PAYE information collected by the IRD with other government agencies and, more specifically, with the Ministry of Social Development.

The closing date for comment on the proposals is July 23, 2010, following which legislation would be introduced.

Recommended