IRD a global leader in shift to digital, unobtrusive tax administration
Inland Revenue is leading the charge in a global shift to digitally based tax administration that's unobtrusive and easy to use, commissioner Naomi Ferguson says.
The New Zealand tax department is in the middle of a 10-year project dubbed "business transformation" where it's overhauling the way it works to prioritise taxpayer experience. Ms Ferguson said the need to replace the outdated First information technology infrastructure gave IRD the opportunity "to think a lot more holistically about the system" at a time when tax administrators around the world are latching on to the opportunities enabled by a suite of new technology.
"There's certainly a lot of interest in our transformation: what we're doing and what we're learning," Ferguson said.
Last month Ferguson attended the OECD forum on tax administration in Norway, a semi-regular gathering of developed nation revenue department chiefs to discuss shared challenges and opportunities, where she moderated a session on tax administration for the future. New Zealand's business transformation programme was name-checked in the OECD Tax Administration 2017 report as an example of rethinking its operations as customer-focused at a low cost and with the least burden.
"This (New Zealand's) approach, which will require changes to legislation as well as processes, is intended to leverage technology to fit the future revenue system seamlessly into taxpayers' day-to-day life," the OECD report said. "Given the nature of change, many administrations report their operating models and structures are no longer seen as needing to endure, instead being seen as having a likely lifespan of three-to-five years."
Ms Ferguson said the forum was "really positive" with a lot of work in recent years on the base erosion profit shifting work to crack down on multinational tax avoidance entering the implementation phase, and the facilitation of automatic exchange of information kicking off after a shared investment across OECD nations.
"There was a sense of optimism about the opportunity of digital, and by digital I mean all of those technologies – cloud computing, analytical capability, robotics, artificial intelligence, smart devices – that are helping us rethink the tax and social policy systems," she said.
That opportunity brought an expanding array of threats, such as how taxpayer information is protected and also the growing issue of cyber-security, she said. Investing in protecting the underlying infrastructure running the department is "very much a part of the transformation journey," she said.
For Ferguson, the end-game is a "much agiler" system with smoother links to other platforms letting customers deal with the tax department through whatever forum they want. If it's successful, the IRD system will be able to operate as near to real-time as possible, which then feeds back into its own responses to taxpayers, allowing more tailored responses or even proactive communication in anticipation of what a taxpayer needs.
"I'm really grateful we started thinking about transformation and replacing First at this point, so we can catch this wave rather than catch up," she said.
That customer focus also underpins IRD's views on how information can be shared. Ferguson says one of the department's principals is putting the decision on how information is used and shared in the hands of the customer, meaning the taxpayer has to have control of their information and allow data to be shared or connected to other systems.
The programme isn't free from controversy. The $1.6-1.8 billion price tag attached to the project has seen intense scrutiny from politicians, and the department has been proactive in publishing regular updates and external quality assurance review on its website.
However, plans to pare back the size of IRD's workforce have seen it at loggerheads with the Public Service Association, most recently over the use of psychometric tests in the restructure, which would shrink the department's headcount by between 25-30%.
A different OECD report released at the forum on The Changing Tax Compliance Environment and Role of Audit noted the new paradigm meant administrations had different demands on the workers and said New Zealand's IRD was seeking "more generic skills and knowledge as additional requirements in this area" including the use of intelligence, digital and technology skills, knowledge of customer lifecycles, analytical and advisory skills, understanding customer behaviour, commercial and business acumen, and identifying and mitigating risk."
Ms Ferguson said the forum's next meeting will be in about 18 months, which means it will have time to see how information is flowing and being used in the cross-border automatic exchange of information arrangements, and also how developed nations' digital and transformation programmes are unfolding.