Minister Congratulates FEC for Constructive Report on IRDFinance
Finance and Revenue Minister Sir William Birch today congratulated the Finance and Expenditure Committee for a "positive, helpful and constructive" report on the policy and operations of the Inland Revenue Department.
He said he was pleased to see that the Select Committee had rejected the extremism and the more bizarre suggestions made by ACT finance spokesman Rodney Hide in his politically-motivated campaign to discredit the department.
"In the event, though it has cost the taxpayer a fortune to take Mr Hide seriously enough to hold this inquiry, we have, as a result of the good sense of the majority of the committee, obtained some quite useful results from it.
Sir William said that every one of the 27 recommendations made by the Committee would get very serious consideration from the Government. IRD was already in the process of taking action on quite a large number of them.
"We have, for example, already announced a reduction from 2% to 1% in the monthly penalty for late payment, and a doubling of the grace period for use of money interest rates from 15 days to one month.
"We have also announced that the hardship, relief and instalment arrangements provisions which presently apply to a limited range of taxes will now be extended to all taxes.
"In addition, we have announced that if a taxpayer enters an instalment arrangement, monthly penalties will be cancelled each month as the taxpayer complies. At present those penalties, even if the taxpayer defaults on a single monthly payment, can apply to the total arrangement," he said.
Sir William said he was pleased to see that, while referring to a PSA statement that senior management had engendered "a culture of punishment and fear", the Committee's report did not itself endorse that description.
"It would have been very unfair to give credibility to a statement of that kind which was made in the middle of employment negotiations by the PSA as a trade union in the process of bargaining with the IRD as an employer," he said.
"Clearly, the culture, operations and policies of IRD are capable of improvement. The performance agreement between me and the Commissioner specifically recognises the importance of better transparency to the taxpayer.
"There is a clear responsibility on the department to be transparent in its communications with taxpayers, to understand the problems they can get into, and to try to assist them to resolve those problems and meet their obligations.
"When I first became Minister, there were significant problems around the administration of child support and student loans. Those problems have been addressed. I expect the same improvement in the interface with taxpayers.
"But perhaps the most surprising outcome was that, considering that 8 million tax documents are generated a year in New Zealand, we got only 188 submissions from individuals and organisations complaining about IRD.
"Frankly, I had expected that the Committee would be drowned in submissions. I had no idea how they might cope with the likely volume that could pour in from unhappy taxpayers right across the nation.
"The fact that only 188 submissions were received is, in my view, the most comprehensive possible answer to the extremism of Rodney Hide's campaign. That is a tribute to the good-sense of taxpayers as well as to the IRD," he said.
Sir William said he was pleased that the Select Committee had taken the advice of the Committee of Experts and the Judiciary, and had rejected the temptation to put the onus of proof on the department in tax matters.
"The liability to pay tax is imposed on the taxpayer by statute. Unlike ordinary debts, it does not need to be proved. If the onus of proof moved to the department, the implications for compliance costs would be horrendous.
"To safeguard the tax base, the department would have to require a major upgrading in record keeping by all taxpayers. I am not surprised that the Law Society was the only major supporter of reversing the burden of proof.
"Lawyers would be the only people to benefit from that change, and they would make a fortune out of it," Sir William said.