BUDGET PREVIEW: Super revenue ministry predicted

If there is one government department which has been widely accepted as performing relatively well, it is the Inland Revenue Department. 

This is no mean feat for an organisation at the forefront of making people pay a large portion of their earnings to the government, enforcing government policy and ensuring miscreants are brought to account.

However, it has been creaking at the seams for some years as this success bred greater workloads, most of which have been outside of the core role of collection of taxes.

The FIRST computer system went live in the late 1980s and has been modified, expanded and covered in band aids ever since.

It has got to the stage that any government policy changes are met with trepidation from within the Inland Revenue as it seeks to manage the changes to the various systems and bolt-ons to ensure they are effective.

If there was ever a system in need of a substantial upgrade, it is the FIRST system.

Given the government’s desire to achieve greater efficiency from its public sector, changes to the delivery of the Inland Revenue are highly probable.

Innovation is what it is seeking.

Inland Revenue is a prime candidate for delivering this, provided it can move itself into the 21st century in terms of how pedantic it is with privacy issues.

While we can appreciate the need for privacy, particularly in light of recent ACC revelations and a need for confidence in the tax system, it has in recent times gone overboard on ensuring it is only communicating, in the safest way, to duly authorised people.

For example, a company has to designate in advance who its shareholders/directors/finance team is to enable them to speak on behalf of the company.

While most businesses use email as a matter of fact, Inland Revenue require a signed release to enable this to happen.

All that could be about to change.

The first inkling was just this month, with the launch of a smartphone application enabling suitably registered individuals to access their personal tax details electronically over the phone.

This is a monumental step for a department steeped in history and conservatism.

If we consider the recent leaps in the advance of technology, coupled with a move to self-assessment - taxpayers assessing their own taxes - then a change of philosophy at the Inland Revenue, coupled with innovative and ground-breaking thinking interwoven with these technological advances, could see the greatest progression in the delivery of tax services in the world.

Our tax system and its management were heralded as world leaders during the 1980s and 1990s. And while they are still regarded as being highly efficient, the time is right for another quantum leap.

But that may not be all. The recently announced “super ministry” could herald further changes to Inland Revenue.

It has been so efficient with the systems and processes that it is not beyond the realms to suggest the collection arms of Justice and Customs could come within a “Revenue” super ministry.

With the potential for changes to ACC, the assessment and collection of ACC levies could also be brought under that umbrella, with case management being dealt with separately by a revised ACC Ministry.

Such changes are not beyond the realms of possibility, particularly as Inland Revenue has experience in such collections (child support and student loans, for example) and its wide powers would facilitate easier collection of the ballooning debt owed to the Crown.

So look out on Budget day tomorrow for significant changes earmarked for IRD - a combination of tax revenues, social policy arm and government collections.

And all facilitated by a massive investment in technology to move the government towards the 21st century.

The unfortunate consequence of such an organisational shift and innovative development is that it will come at a cost of a large number of jobs within the relevant government departments.

Efficiency and effectiveness has a cost to everyone involved.

There has been much comment that a government that cannot increase its taxes because of the state of the economy would instead resort to increased audit activity.

That may be the case, but through technology and innovation enhanced government revenue through more efficient and effective collections is just as good. 

Greg Thompson is a partner, tax, at Grant Thornton. 

Email: greg.thompson@nz.gt.com