Chartered Accountants Australia and New Zealand (CA ANZ) fully supports the intent of new legislation opening the way to increase automation for taxpayers, but is concerned by a potential gap between policy intent and the day-to-day impact on Kiwi tax payers.
Automation will put many taxpayers directly in contact with Inland Revenue for the first time.
New Zealand Tax and Financial Services Leader for CA ANZ, John Cuthbertson, said changes resulting from the legislation would mean hundreds of thousands of New Zealanders having to actively engage with Inland Revenue. "That's something many Kiwis would not have had to do for a generation."
"The devil is not in the legislation's detail, but rather, in the implementation. For example, the first-time users will need support."
CA ANZ this afternoon made an oral submission to the Finance and Expenditure Select Committee on the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill.
Speaking before the oral submission, Cuthbertson said "automating tax refunds will make life easier for both Inland Revenue and taxpayers. It will work for most taxpayers."
"But there may be practical issues for taxpayers who receive unusual additional income beyond their expected reportable income, including for example income from the sale of a property or income as a beneficiary of a trust."
"There will be a risk that taxpayers with changing circumstances will be pushed into a situation where the tax they have paid is different from what is actually owed."
"The challenge for Inland Revenue is to look after these people."
Cuthbertson said CA ANZ was also concerned that proposals allowing Inland Revenue to instruct investment income payers to change a taxpayers' resident withholding tax rate after 20 working days relied too much on taxpayer engagement and familiarity with the system.
CA ANZ's written submission on the Bill has a number of suggestions to avoid any "implementation gaps" including annual implementation reviews by Inland Revenue and reports to the Revenue Minister on the legislation's effectiveness.
The Bill includes proposals to modernise and improve the legislative settings for tax system administration. It is part of the Government's drive to transform the revenue system through IR's Business Transformation programme which focuses on greater automation and digitisation.
"It is vital that the roll out of the next phase of Inland Revenue's Business Transformation goes smoothly," Cuthbertson said. "Automation will mean many taxpayers will soon be directly interacting with Inland Revenue for the first time. It is crucial that a range of education and communication channels are available to help these 'first time users' navigate the system, and their role within it.
"Applying key learnings from earlier Business Transformation phases will minimise foreseeable operational issues and maintain ongoing trust in the tax system."
Cuthbertson emphasised CA ANZ strongly supported the Bill. "It just needs some support mechanisms."
"Challenges around implementation and operation need to be addressed to ensure the legislation worked as intended."
"Specifically there needs to be ongoing management and overview of progress."
As well as automating individuals' income tax returns, the Bill includes a number of positive proposals, including the extension of the Commissioner's care and management powers which will assist the Commissioner in applying the law fairly and consistently.
CA ANZ’s submission
The Bill proposes changes which will automate and simplify tax administration for many taxpayers.Read the Submission