As a steward of the tax and social policy system, Te Tari Taake, Inland Revenue is uniquely placed to ensure its long-term integrity and help drive better outcomes and experiences for New Zealanders.
We are gearing up to take a more proactive stewardship role that looks to a longer-term view of the system, products and processes we and others are accountable for and the information we collect. Key pieces of work completed this year, and others under way, are helping to shape the future.
Te Tari Taake, Inland Revenue implements the Government’s Tax and Social Policy Work Programme. The current programme includes:
- enacting changes to taxation of residential investment property
- working on the role of tax in the sustainable economy and the environment
- ensuring a fair and efficient tax administration, and
- progressing international priorities.
This year, our policy work included a review of fringe benefit tax (FBT) published in August 2022. The last full review of FBT was in 2003 so a part of this latest review was to explore whether the tax, as currently constructed, is fit for the future. Our findings are there for future governments to consider when determining their tax and social policy work programmes.
Our findings noted that FBT continues to deliver its primary task—ensuring remuneration from employment is taxed whether it is paid in cash or as a non-cash benefit.
However, we noted it is not clear that the tax functions well—stakeholders spoken to said it imposes a high administrative and compliance burden relative to the tax at stake. Some also believe FBT is not complied with by all businesses or enforced by us.
Te Tari Taake, Inland Revenue also released 2 documents aimed at providing high-quality information and evidence for discussions around tax policy.
In August 2022, we published a long-term insights briefing on tax, foreign investment and productivity. The briefing supported the OECD’s conclusion that New Zealand has a relatively high cost of capital, which has the potential to adversely impact productivity and economic performance.
We noted that many factors can affect productivity outside of company tax settings.
The briefing considered the pros and cons of a set of policy reform options that could affect costs of capital. While the options all had some benefits, they also all came with their own trade-offs that would have to be managed if any changes were to be made.
In April 2023, we published a report on a 2-year research project that looked at the effective tax rates of 311 of New Zealand’s wealthiest families.
A key finding was that the median effective tax rate paid by these families on taxable income was about 30% while the rate in relation to all income sources, including capital gains, was 8.9%. In making these calculations, we used a comprehensive set of data that included information provided by the families themselves.
Internationally driven measures feature heavily in our work to ensure Aotearoa’s tax system contributes to global solutions for global tax issues.
A key change coming up is legislation enabling New Zealand to take part in an OECD and G20-led plan for a 15% global minimum tax on multinational groups.
The new rule would apply to around 24 New Zealand-headquartered groups and mean they are required to:
- calculate their effective tax rates in each country where they operate, and
- pay additional tax to New Zealand on ‘mobile income’ that has been taxed at less than 15%.
The rule would also allow our country to take part in collecting equivalent tax from groups headquartered in other countries if they’re not already subject to tax there.
Te Tari Taake, Inland Revenue operates in a wider digital ecosystem that includes external providers that offer business solutions to their customers—some make tax just a part of their service or product.
Providers connect with us via our gateway services channel. This channel supports 75% of all customer interactions with us and all cross-government information-sharing. 2.7 million accounts across 1.9 million New Zealanders are directly supported by gateway services.
We receive requests from other providers to come onboard. Providers are taking an increased role where it benefits customers, tax compliance and Te Tari Taake, Inland Revenue.
We’re developing a strategy outlining which providers we are able to work with, what data they should have access to and how they can use that data. It will help improve services to our customers and compliance results, within a robust risk framework.
Te Tari Taake, Inland Revenue has a view to the future, and we’re undertaking research and analysis to ensure the tax and social policy programmes we administer will be fit for purpose in the long term.
A good example is the work we have begun to review Working for Families. This project is focused on developing our long-term strategy on income support payments delivered through the tax system. It will consider what an ideal tax and transfers (social payments) structure could look like, what the implications might be, how the current tax credits could be improved and how support for customers could be more accessible and timely.
This work contributes to our stewardship obligations under the Public Service Act 2020.
We are also on a journey to becoming an organisation based on te Tiriti o Waitangi. We have a range of initiatives under way that will help us become a better Treaty partner over time and benefit Māori customers.
You can read more about what we’ve done to build our capability as a Treaty partner in the next section as well as our work to make Te Tari Taake, Inland Revenue a diverse and inclusive workplace, and our governance and management.