Most of the money we collect comes from customers who file and pay on time. Given the uncertainty many New Zealanders faced this year, we expected there could be a decrease in the numbers of people filing returns and paying tax on time.
However, we’ve seen no fall, indicating customers have filed, kept up their tax payments or worked with us to stay on track. This year, 89.9% of payments made by customers were on time.
Beyond helping people, we’ve worked to maintain New Zealanders’ positive attitudes about paying tax so that the country, and the revenue system, is as well positioned as possible to deal with the ongoing impacts of COVID-19.
Preventing issues at the start
The digital revenue system has changed the way we approach compliance. We’ve moved the focus from the end of the process to the beginning. We help people throughout the year to get their tax and payments right, rather than waiting until they make an error or get into debt.
Our people have continued to take tailored approaches to help different customer groups get their tax sorted at the start. For example, we’re contacting all new business customers - making about 450 calls a fortnight - to work through their tax obligations and any issues they may have.
Increasingly, corporates are proactively coming to us to work through issues - we’re seen as being more approachable than in the past. More large customers are contacting us early, asking for views on their tax positions through either advance pricing agreements or other rulings.
Taking a tailored, helpful and upfront approach has led to more large businesses entering into advanced pricing agreements with us. The amount of income tax paid annually by groups that have agreements has doubled to just over $1.1 billion for the 2020 year.
Analytics is helping customers understand their bright-line obligations
Inland Revenue has been active in communities, using analytical tools to better understand people’s issues, the information they need and how we convey it. A great example is our focus on helping people comply with the bright-line property tax rule.
Each year, up to 9,000 property sales are potentially subject to the bright-line rule. It’s a rule that means people may need to pay income tax on any profits from selling a house within 10 years of buying it. They’re exempt if selling their main home.
Our new analytical tools combine various datasets, such as tax statement information from Toitū Te Whenua Land Information (LINZ), to look at what’s happening in the property market. We match this external data with individual taxpayers in our systems so we know who’s sold a property.
Thanks to the data and analysis we undertake, we can identify sellers with a bright-line obligation and take steps to ensure customers are proactively declaring this income in their tax return. We use our new tools and capabilities to ensure every seller knows to get their tax right from the start.
We’ve gone from providing generic information for the general public, to more personalised, proactive interventions. In November 2020, we contacted around 12,000 customers who had potential bright-line sales, and we also advertised online.
This generated 62,000 hits on our website in November alone, and 1,780 downloads of our property sales information form. Inland Revenue is also analysing the types and scale of transactions across the regions, gaining a full and current picture of the property market that informs how we direct our resources. For example, a trend identified this year was customers selling bare land, but claiming incorrectly that they were exempt from bright-line because they’d intended to build their main home on it. We set up a team to offer the right information to customers on this issue.
Property title information can be complex. Our people used to sift through a lot of data to find potential bright-line instances, often checking back through multiple prior titles records to establish dates of ownership. Now the analytics identify candidates almost instantly—the strike rate for finding those with an obligation has increased significantly. The tools also rank potential candidates using sales value data, prioritising cases where the greatest amount of revenue is at risk.
We send information on bright-line to customers soon after they sell a property and follow up if there’s a compliance issue. The time saved is spent helping resolve errors that customers have made, or on other compliance priorities.
Our people now have actionable information at their fingertips and greater confidence that they’re contacting customers for a good reason. Reaching out soon after a customer has sold a property also means we need to audit less. A direct signal of this is the increase in customers making voluntary disclosures about a bright-line obligation: 397 were made in 2020-21 compared with 91 in 2019-20.
Most importantly, the way we’re managing bright-line is better for our customers. They can understand early on what’s involved and prepare financially to meet their tax obligations.
We've engaged with people working in residential construction around cash transactions. Our information to them carried the message that undeclared cash jobs hurt our economy and reminded 'tradies' of their role in helping New Zealand recover from COVID-19.
Our analytics also identified real estate agents claiming high expenses relative to their income, often with a lack of records and non-deductible expenditure being claimed. We've engaged with the real estate industry and provided targeted marketing and education materials to help agents get their expense claims right.
Inland Revenue’s Kaitakawaenga Māori service delivers tax advice in a whānau, hapū and iwi-centric way and ensures our Māori customers are considered in all aspects of our work.
Kaitakawaenga means a go-between, mediator or negotiator. They’re critical connectors to our Māori customers and essential to developing our delivery approaches with their knowledge around the dynamics of whānau, hapū and iwi, as well as tikanga Māori and te reo Māori.
As well as serving Māori individual and business customers, Kaitakawaenga provide advice to Māori land trusts, marae, kōhanga reo and other not-for-profits. This provides a great support for organisations where people in voluntary positions, such as treasurers, frequently change.
December 2020 marked 30 years for the service, which was created after the launch of the Government policy requiring government departments to recognise their responsibilities to Māori under Te Tiriti o Waitangi.
You can read more about the Kaitakawaenga service on our new website landing page tailored for Māori customers.
There’s more on Inland Revenue’s services and outcomes for Māori in this report.