IR Business Transformation Gathers Pace

12 April 2016

Iain Craig, Tax Partner |

Two consultation papers have been released by IR as part of the IR Business Transformation.  The first, contains suggestions on making it simpler for businesses to manage PAYE and GST and the second looks at the Tax Administration Act.  The documents are thought provoking and set out a number of ideas and thoughts as to what a tax system for the future might look like. 

The IR are also keen to get feedback on the topics discussed and pose a number of important questions on the website

For PAYE there are a number of proposals put forward such as allowing employers to carry out their PAYE obligations when they pay their employees, rather than at a separate time required by Inland Revenue.  Updating employee records on a real time basis including when they cease to be employed.  In order to improve the accuracy of records allow the employee to provide a date of birth to the employer: creating a real time fix to the records with the IR when an error arises; and using appropriate portals with IR to allow greater access to real time information.

The questions IR are looking for feedback on are:

PAYE: Feedback is being sought on:

What issues do you have with current PAYE processes?

Should payroll software be used to send information about PAYE income and deductions to Inland Revenue when staff are paid?

Should employers be required to notify Inland Revenue when they start or cease to employ?

Should payroll software provide information about new employees to Inland Revenue when the information is entered into the payroll system?

Should employees provide date of birth information to Inland Revenue via their employer?

What should the approach be to correction of errors?

Benefits of better access to information held by Inland Revenue?

Is there scope to rationalise the provision of employer information to other agencies?

How do you think secondary tax should be improved?

How do you think the tax treatment of holiday pay should be clarified?

What do you think should be done in years with an extra pay day?

How do you think legislated rate changes should be dealt with? 

GST collects around 32% of the Governments revenue and it generally does so relatively efficiently.  However can it be improved? 

In terms of GST the focus for proposed changes is on digital filing to reduce time and cost to businesses by proposing that businesses are able to do their GST returns directly through the accounting software packages that many of them use, rather than making them file separate GST returns.  It also proposes the ability for businesses to be able to attach additional information electronically to the returns such as documentation in support of a large input tax credit claim.  

GST: Feedback is being sought on:

Do you support linking business accounting systems to IR for the purposes of GST? 

Should moving to the new system should be voluntary or compulsory?

Should some businesses be required to file GST electronically?

Should it be compulsory for refunds to be direct credited?

The Discussion Document on the Tax Administration Act contains information and points for discussion which are important to the fundamental administering of the Commissioner’s obligations and role.  It is slightly more esoteric topic than the practical matters of how to file GST and PAYE returns and the exchange of information.  It covers topics such as:

  • The role of the Commissioner and whether she should have greater administrative flexibility and be able to extend her care and management powers to social policy functions.
  • What should the Commissioner’s power be to collect information and to have access to bulk information datasets?
  • What implications arise on taxpayer secrecy and whether or not information should be shared with other Government agencies on a consent based disclosure or otherwise?
  • If the Commissioner has access to raw data from the various forms of third party information will it be acceptable for the Commissioner to pre-populate the income tax returns of individuals and then ask the individuals to check them?
  • What should the disputes process look like in the future if the assessment regime changes in this fashion?

These issues represent significant developments which require careful thought to conceptualise and assess the potential impact on the tax system.

The website and Discussion Documents are worthy of your attention. To make a submission or to read the full details of the proposals, go to