Simplification of Income Tax Collection System

Finance Minister Bill Birch tonight announced changes in income tax collection that eliminate 1.2 million IR5 income tax returns, save taxpayers up to $60m a year in compliance costs, and create annual economic gains rising to $311m in 2003-4.

Mr Birch said new IRD systems would come in progressively during the next three years. A $64.5m IRD funding increase in the next 18 months would later help reduce IRD ?s operating baseline $32.5m a year by 2002-03.

?These gains are made possible by the systematic application of improved technology to a collection system which has already been subject to continuous rationalisation and streamlining over the past 10 years,? he said.

?Employers currently collect 4m tax deduction certificates a year for IRD and complete 200,000 complex end-of-year reconciliations. In the new system, a simplified monthly schedule will provide that plus information now provided on a variety of other forms.

?We are also taking advantage of these changes to make the PAYE system more accurate and more flexible.

?That will remove a major cause of strain and anxiety for tens of thousands of low income families who dread being faced by lump-sum tax bills at the end of the year, because they may not have the cash available to meet them,? Mr Birch said.

?These decisions, confirmed by Cabinet last week, mean that between April and June next year, the last IR5s will have been filed by wage and salary earners.

?Employers will start the new monthly schedule in April. New geared-up IRD advisory services will be in place then to facilitate the changes.?

Mr Birch said new call centres giving business and personal customers toll-free access to trained staff with the specialised skills and data access to deal with their tax inquiries would play a key role in these reforms.

?We aim to make IRD only a free 0800 call away from any taxpayer.?

Mr Birch said IRD projected that, from next March, the introduction of call centres would slash present unsatisfactory waiting times for service, enabling taxpayers to talk to an Inland Revenue customer service officer within 30 seconds of calling in.

To support these services, the Government would be making a $2m investment in the technical skills development of IRD staff, aiming for a progressive improvement in present quality of service, especially taxpayer advice and support.

?Legislative reforms will be introduced later this month to simplify the tax codes to be used from next April, and improve the accuracy of PAYE deductions to a point where end-of-year tax payments and refunds are a thing of the past for most people,? he said.

Other planned changes in legislation include:

A new simple process of claiming for donations, housekeeper and childcare rebates
Improvements in the accuracy of resident withholding tax systems and the various social policy systems administered by IRD through the tax system.
?After IR5s disappear, only 400,000 people will be be asked to verify an income statement sent to them by the department based on information provided to IRD monthly by employers.

?If the taxpayer agrees with the income statement, no further action is needed. Moreover, our 300,000 recipients of family assistance will also find that these changes provide them with more accurate and up-to-date entitlements.?

Mr Birch said IRD managers would be working through the detail of the changes involved in implementation with their staff throughout the day tomorrow, and would release more detailed information late tomorrow.