Report to the Treasurer and Minister of revenue - by a committee of experts on tax complianceBill Birch Treasurer
Report to the Treasurer and Minister of revenue
By a committee of experts on tax compliance
SOME TERMS USED IN THE REPORT
The term 'organisational review' refers to the work and recommenda-tions of the organisational review committee, chaired by the Rt Hon Sir Ivor Richardson. The committee reported in April 1994, having con-ducted a fundamental, strategic review of the Inland Revenue Depart-ment and its activities. The committee was asked by the then government to 'investigate and recommend the optimal organisation arrangements for the tax assessment and collection system, and other activities that are currently a part of the tax system, the provision of taxation policy advice, legislative management and ministerial servicing'.
The main recommendations made by the organisational review commit-tee concerned the structure of the department, tax policy advice, resolu-tion of tax disputes, technical quality, subcontracting and the roles of the Commissioner of Inland Revenue and Chief Executive.
These recommendations have largely been or are in the process of being implemented. In particular, the Inland Revenue Department's service delivery has been restructured from a functional basis to one based on customer segments. The department has moved from a field delivery structure based on four regions and 26 district offices, to six service centres ('hubs') and smaller branch offices and customer service offices ('spokes'). Under this new structure, national office managers responsi-ble for the design of services in their customer segments, work with service centre managers who have responsibility for delivery in their ar-eas. The distinction between design and delivery has ensured clearer ac-countabilities for managing performance at national and local levels.
A generic tax policy process was introduced following the Organisa-tional Review. This process is discussed separately below. New disputes resolution procedures took effect on 1 October 1996 and included the establishment of a new adjudication function and also a litigation man-agement unit within the Inland Revenue Department. The new adjudica-tion unit ensures that a separate structural focus is given to the adjudica-tion of the department's final quantification of a taxpayer's liability. Section 6A of the Tax Administration Act 1994 gives explicit recogni-tion of the obligation on the Commissioner to operate within limited re-sources in the care and management of the tax administration functions.
Generic tax policy process
The generic tax policy process was introduced as a result of the organ-isational review. It is intended to improve the process by which tax pol-icy is developed. The organisational review committee found that at both ministerial and departmental levels, the roles and accountabilities at each stage of the tax policy development process needed to be more clearly and formally defined. The committee thought that the tax policy process had not been clearly specified or agreed and had not ensured that strate-gic issues and issues of detail were dealt with in an appropriate sequence at the appropriate level or in the appropriate forum.
In order to address these problems, the organisational review committee recommended introducing a generic tax policy process to clarify the pro-cess of policy development and the respective roles played by Treasury and the Inland Revenue Department in that process. In particular, the committee considered that the Inland Revenue Department's policy ad-vice function should be more prominent and should be strengthened.
The main objectives of the generic tax policy process are to:
encourage earlier, explicit consideration of key policy elements by Ministers;
provide opportunities for substantial external consultation in the tax policy development process, which is intended to increase transparency and improve the quality of advice at both the con-ceptual and detailed design stages; and
clarify the responsibilities and accountabilities of participants in the process.
The generic tax policy process has five distinct phases:
- Strategic phases - the development of an economic strategy, a fiscal strategy, and a three-year revenue strategy.
- Tactical phases - the development of a three-year work programme and an annual resource plan.
- Operational phases - the detailed policy design, formal detailed consultation, and ministerial and cabinet approval of detailed policy recommendations.
- Legislative phases - the translation of detailed policy recommendations into legislation.
- Implementation and review phases - the implementation of legislation, the post-implementation review of legislation, and the identification of remedial issues.
A key feature of the generic tax policy process is the emphasis it places on consultation at each of the main stages of the process with taxpayers, their advisers and professional and industry bodies.
Directions: Customer Requirements
Directions: Customer Requirements is a major project, the primary ob-jective of which is to reduce compliance costs for taxpayers. It is the cur-rent major strategic project being conducted by the Inland Revenue De-partment. This project is explained further in appendix 5.
Davison Commission and the Winebox papers
The term 'Davison Commission' refers to the Commission of Inquiry that was set up in September 1994, presided over the by Rt Hon Sir Ronald Davison, formerly Chief Justice of New Zealand, to examine transactions referred to in papers presented, by leave, to the House of Representatives by the Hon Winston Peters on 16 March 1994. These papers are referred to as the Winebox papers. The terms of reference of the Commission of Inquiry required it to report upon whether the Inland Revenue Department and the Serious Fraud Office had acted in a lawful, proper and competent manner in dealing with the relevant transactions, and to examine whether any changes to the criminal or tax laws should be made for the purpose of protecting New Zealand's income tax base from the effects of fraud, evasion and avoidance.
The Davison Commission reported in August 1997,278 and found that the Inland Revenue Department had acted in a lawful, proper and competent manner in dealing with the Winebox papers. The findings of the Davison Commission are subject to judicial review proceedings.