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Posts Tagged ‘IRD’

Tax pain time

Posted by on March 26th, 2013

Next week thousands upon thousands of New Zealanders will wake up to a cut in their take-home pay because of policy decisions by the National/United Future government.

From 1 April 2013 the minimum KiwiSaver contribution is increasing from 2% to 3%, while the Student Loan compulsory repayment jumps a whopping 20% to 12 cents in every dollar earned over the repayment threshold.

Now Labour stands for a gradual move to universal, employment-based KiwiSaver contributions over time, because that will grow the economy and secure savers in retirement.

But with unemployment today at record levels, and with so many families only just getting by, it’s crucial that changes which hit people in the pocket are well-signalled and well-understood before they take effect.

Complex communications around tax changes need to be relevant. Some Kiwis watch the 6pm news; others will see billboards on the daily commute; and web-savvy students might expect important information to be pushed to them through social media.

Ultimately the obligation for quality communications falls squarely to Revenue Minister and United Future leader Peter Dunne.

But over and over again I’ve heard that many Kiwis have no idea how next week they’ll have less cash-in-hand to feed the kids and pay the mortgage.

That’s not good enough from Mr Dunne. That’s not good enough from the National/United Future Government.

Now too many Kiwi taxpayers find a phone call to the IRD an exercise in frustration.

But you can bet there’ll be lots of calls on pay day next week.

Too often people who phone the IRD contact line get put in a long, long queue (last time I tried I waited 45 minutes).

Even worse, callers are sometimes flatly told by a machine “We’re too busy – call back later” then disconnected. This is just not good enough. It is the taxpayer who is liable if issues are not resolved. Any Government has a duty to facilitate good compliance.

Therefore it’s a bit of a worry that IRD had its staffing slashed by 6% last year.

Who is going to answer all the calls?

And with the external communications so lacklustre, how can we be confident that Peter Dunne has ensured IRD’s own staff know what’s going on?

Fortunately (for the first time in quite a long while) Mr Dunne has pinned his colours to the mast.

I asked Dunne Parliamentary Written Question 1401 (2013), and here’s what the Revenue Minister has assured the public:

Portfolio: Revenue
Minister: Hon Peter Dunne
Question: Is he confident that the Inland Revenue Department is adequately staffed to manage any requests from businesses related to the change in minimum KiwiSaver contributions?

Answer Text: Yes.

Next week we shall see whether Peter Dunne’s word is more credible than his department’s communications.

Dunne struggling to keep up?

Posted by on December 5th, 2012

In February this year, the Prime Minister said tax policy was being held back because the computer systems “can’t actually support radical changes from Government.”   The Prime Minister’s comments over nine months ago indicated the urgent need to outline a credible plan and timeline for the necessary system upgrade. 

Since then, there is no progress to report.  Consultants CapGemini are rumoured to have been paid tens of millions for scoping reports.  Bill English was reported as saying $700 million from asset sales proceeds will be spent ‘rebuilding the country’s tax system’ but has dodged direct questions on the topic since.  Dunne says decisions haven’t been taken yet.

Voluntary compliance for income tax payments is declining. At last count 1 million tax returns hadn’t been processed and $7 Billion in tax was outstanding. Unbelievably, Dunne says 32 separate privacy breaches in a year isn’t evidence of a systematic failure and he is refusing to answer specific questions on the matter.  Call centre staff turnover is high. Morale is low. 

The computer problem desperately needs addressing as I explained in a recent article in the Otago Daily Times.  And it requires a transparent process.  Nothing to report after nine months begs some questions about competence.

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IRD computer crisis

Posted by on October 2nd, 2012

Crazy to think the effective collection of tens of billions of our tax dollars every year is dependent on museum-grade technology.

The Inland Revenue Department has been pleading for a new computer system for years. Its current one (known as FIRST) was built in 1992 when the Internet was still in nappies.  Google didn’t exist and Facebook was more than a decade away.

In February this year, the Prime Minister said tax policy was being held back because the computer systems “can’t actually support radical changes from Government.”  He also said “You don’t want to be in a position where Parliament is held hostage to a lack of technology.”

But New Zealand is being held hostage to this technology. Well placed sources tell me that the Government couldn’t currently implement a capital gains tax – even if it woke up to the need for pro-growth tax reform to support our exporters – and actually wanted to follow the advice of tax experts including Treasury officials, the World Bank, the OECD, and others.

This Government has tinkered with tax-thresholds and it gave tax cuts to the most wealthy in 2010, but it hasn’t made the big structural changes necessary to get our economy on track.  Perhaps it is afraid of getting burnt again after an attempt at building a new system to cope with Student Loan changes was abandoned with $21 million spent last year.  Certainly development plans have gone quiet since.

Despite Key’s statements in February, no credible timeline for the necessary comprehensive replacement system has been ventured by the Government.

Meanwhile the legacy FIRST system creaks on. Unlike in modern IT, changes made in one part of the FIRST system do not flow through to others. Consequently even mild changes are time-consuming to implement.  A limited budget means resources supporting the antiquated system are not available in the same measure to support other core activities. Resources are stretched – and so more and more mistakes are being made.

Yesterday, Peter Dunne responded to my press release concerning the urgent need for upgrade, by defending IRD’s most recent performance lapses as the result of human error and poor forecasting (leaving the personal slights aside). Well and good, but with all due respect – those are precisely the kinds of errors that are made when an organisation is stretched.  And to those could be added around $7 Billion in outstanding debt and a surprisingly high number of unprocessed tax returns.

What is urgently needed is commitment from the Government to a system upgrade, accompanied by project details including a credible timeline for implementation.  Any response prominently featuring the word ‘relaxed’ and speaking of 5-10 years simply won’t cut the mustard.

Updating our IT shouldn’t be that hard. We can learn from others. After all, we’re not the only country in the Western World with a tax system.

Government assistance = 0800 PLEASE WAIT

Posted by on August 23rd, 2012

My column on the RadioLive website this afternoon highlights how the government have failed in their promise to deliver better public services. Think how many work hours are lost every day as people ring govt 0800 numbers and wait, and wait, and wait…

Despite National’s promise to move resources ‘from the back office to the front line’ we’ve seen local frontline public services scaled back or closed, while the never-ending list of government 0800 numbers continues to grow.

Take Housing New Zealand for example. The Government has closed the doors of local branches and directed people to an 0800 number where they can wait over an hour just to have their call answered.

Housing New Zealand are a bit better than the IRD though. If you’re calling the govt to make sure you’re paying all your taxes, you could be up for a wait of several hours!

Work and Income call centre statistics aren’t that much better either. Last year some poor soul spent one hour and 10 minutes waiting for their call to the government “job line” to be answered. 6,500 people gave up trying to get through. No doubt Paula Bennett will try to argue that they’re lazy and unwilling to work when actually what they weren’t willing to do was sit around for hours waiting for the government to answer the phone.

I think it’s good that the government is providing a greater range of ways to access public services, such as through 0800 numbers and improved use of online communications, but they need to be properly resourced. New technology isn’t always cheaper, in fact sometimes it costs more to realise the full benefits of it.

National = 0800 hold and wait

Posted by on August 21st, 2012

If the current government are really serious about reducing compliance costs for small business, they could start by getting the IRD call centre into shape. Statistics that I released today make for damning reading. Here are a few highlights:

  • Last year over a million callers to IRD numbers gave up before their call had even been answered
  • A further 260,000 callers ditched their calls after being placed on hold
  • The longest wait time for a call to the IRD was 2 hours and 29 minutes
  • Over 200,000 callers waited for over quarter of an hour to have their call answered

National is always talking about productivity, but how does having people waiting for hours on end to speak to the IRD help with that? Millions of dollars are being lost every day as Kiwis sit around waiting for the IRD to pick up the phone.

In the past four years the IRD has dished out over $31 million in redundancy payments. Clearly that’s having an impact on its customer service record. It’s time for the National government to get this mess sorted out.

100% tax cuts ahead

Posted by on May 7th, 2012

Today’s crash of Inland Revenue’s website highlights a wider IT vulnerability that must be addressed – urgently.

The IRDs current tax collection system was designed in the early nineties. It was effective for many years.  But it has become increasingly obvious that patches applied over recent years are a failing stopgap.  New Zealand needs real progress on a replacement system.

The Government has already written off millions of dollars after a failed attempt to rebuild the student loans component of the IRD online collection system.  Since then no progress, only bad news.  Earlier this year, it was revealed that the Government estimates a necessary IT rebuild of IRD’s whole tax collection structure will cost up to $1.5 billion dollars.

New Zealand is not unique in having a tax system.  Adapting successful systems used elsewhere is the logical approach to replacing our ailing IT infrastructure.  This problem has been on the horizon for some time.  It beggars belief that the Government has not yet outlined a convincing plan or timeline for the development of overdue IT solutions. 

Voluntary compliance with a transparent tax system is critical to the efficient and effective functioning of our society. 

Businesses rely upon our tax collection system working properly when they put their GST returns in.  They don’t have time to waste reentering data when systems go down.  We cannot afford to risk the patience of those citizens who wish to comply with their civic duty.

And testing the patience of businesses is not all that is at stake here. Our hospitals and schools rely upon a trustworthy tax-collection system.  The IRD must not be allowed to fail.

The Minister of Revenue has not put forward a credible timeline for the project, and it is becoming clear that the government is sitting on its hands whilst New Zealanders face the consequences of an IT time bomb.

Not good enough Minister.

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Filed under: Tax

Deck chairs

Posted by on March 19th, 2012

The Inland Revenue Department’s tax policy work programme was released by Hon Peter Dunne on the weekend. 

Reading through the Minister’s related speech, I couldn’t help wondering about the symbolism of its delivery just one month short of the Titanic’s 100th anniversary.

According to its own publicity, the IRD tax policy work programme places emphasis on achieving efficiency and fairness in the system.  Worthy objectives indeed.  And much of the work in the programme is worthy – plugging holes, and trimming sails to align with competitors – where it is to our advantage so to do. 

But significant change appears to have been ruled out once more. A Capital Gains Tax that would push investment towards the productive sector, for example, will not be considered.  The current tax system watches on as the Government shuffles deck chairs and sails towards a $12 Billion deficit.  This is crazy.  If you don’t change anything, nothing will change.

Our current tax system is in need of a serious overhaul.  The tax policy work programme looks a bit like an exercise regime for a thoroughbred nearing a big race – light and steady.  This would be fine if we owned a thoroughbred.  We don’t.  The Minister is refusing to admit his existentially-challenged Clydesdale needs anything more than a good make-over and a stiff crack of his whip.

The fiscal hole is getting bigger and the Government has no credible plan to address it. In my earlier post, I asked how the Minister of Finance could continue to credibly claim tax changes implemented under his watch were ‘broadly revenue neutral’ – when the Government’s own officials say otherwise.  IRD officials have said that 2.5 percentage points of a 4% drop in revenue were due to Government policy changes. 

We need jobs and a plan to address the structural issues that underlie our current account deficit. Tinkering with finer points in the tax system and changing who owns what through asset sales doesn’t begin to address the serious issues facing our economy.  New Zealand debt is set to continue climbing under National.

On the matter of economic policy and tax settings: no amount of deck-chair shuffling will change things – if the ship remains set on the same course.

Only the skeleton will remain in Invercargill

Posted by on August 9th, 2011

In 2011, Red Alert is doing a few new things. One of them is to introduce you to some confirmed Labour electorate candidates who will do the occasional guest post.

Today’s guest poster is Lesley Soper, the candidate for Invercargill.

Lesley Soper

On Friday Aug 5 Inland Revenue (IR)  announced a proposal to cut 191 jobs in 5 provincial cities around the country. Rotorua will lose 44 positions; New Plymouth 42; Napier 16; Nelson 26; and Invercargill, the provincial city most dramatically affected, will have 63 jobs slashed. Invercargill is left with a skeleton staff of 19 positions.

National Finance Minister English said recently that “people outside Wellington were weeping tears of joy” at public sector cuts. This was as  justification for another broken election pledge by National – the one to cap, not cut, the state sector. Justification necessary since more than 2000 state sector jobs have actually gone since National took office.

The 63 people whose jobs will go from Invercargill are not faceless  Wellington bureaucrats. They are part of the 60% of Public Servants working outside Wellington.   They are locals, long-serving and loyal.They are our friends, family, and colleagues.They belong to local Service Clubs; play for local sports clubs; own local homes; spend at local businesses; their kids go to local schools.     No-one in Invercargill is ‘weeping for joy’ that they are losing their jobs and that many of them and their families will leave the city.

The reaction of Invercargill National caretaker MP Eric Roy to this?  –  “I don’t feel that great for the people affected”, he said,  “… but in my role as a member of the government, we have to continue to strive for efficient and cost effective government.” In other words Eric, toe the party line;  you can’t even be bothered fighting for your city or its people. Shades of your 2010 reaction to the proposed loss of neurosurgery for the Deep South, when you said “they are  still making aeroplanes.”

The reaction of Bill English, Clutha-Southland MP to this devastating news for his next-door electorate?   The planned 63 job losses are  “pretty tough” … “but the good news is  …  the economy is pretty sound and it’s going to be growing.   It’s our job to make sure there are other opportunities for them.” Shades of the Budget promise of 170,000 extra jobs  –  from where Bill, and doing what? Where’s the plan from National that will deliver a single extra job to these 63 loyal, experienced, long-serving staff; or to their colleagues in DoC likely to hear the same news; or to the 41 Hillside workers just up the road in Dunedin?

And both National MP’s show their vast ignorance as they witter on about “technology change” and “more efficient information transfer” as though they don’t know that Invercargill too has modern technology and that the IRD has already admitted that ‘virtual jobs’ could be done anywhere. So why not leave them in Invercargill?

This is not a case of ‘reining in’ the public sector [warning: a favourite National MP phrase]. This is a case of cutting the provinces to the bone, by removing much ‘virtual work’ that could be done anywhere from the provinces to the metropolitan areas for no real gain whatsoever. Institutional knowledge goes; community and workplace services go from Invercargill; plus the spending power of good jobs with local businesses.

This is National government cuts to baseline funding.This is bashing the provinces where they think they are safe. Pure and simple.

One of many questions has to be asked.  With a skeleton of just 19 positions remaining, how long before Invercargill loses those as well? Where do ‘economies of scale’ arguments end?”

I’ve heard Invercargill, Nelson, Rotorua, Napier and New Plymouth being referred to as the ‘swing seats’. Either that, or the last bony hand left standing can turn out the lights after November 26th.

Lesley Soper is Labour’s Invercargill Candidate.   She was a Labour List MP 2005-2008, and Deputy Chair of the Health Select Committee as well as a member of Transport & Industrial and Regulations Review Select Committees.    Before entering Parliament Lesley was elected Deputy Chair of the Southland District Health Board; was an Organiser for NZEI Te Riu Roa; previous Head Librarian SIT and a staff Rep on the SIT Council; and Chair of the Combined Education Unions of Southland.   Lesley was Labour Women’s Vice-President 1995-2004.
Outside politics, Lesley & husband David are renovating their 1914 Invercargill home, and Lesley has just finished co-writing the sell-out 360page book ‘Live & Let Live : the history of the Soper family’ and the accompanying ‘Soper Family Cookbook’.

IRD finds $1.269b in audit discrepancies in 2008-09

Posted by on November 19th, 2009

The IRD reported discovering tax discrepancies of over $1.2 billion for the 2008-09 financial year, according to the IRD’s 2009 annual report. This figure is down on the $1.449b in 2007-08, but up significantly on the 2008-09 budget of $877 million. Of the total, $436m was as a result of IRD investigations, $123m aggressive tax issues, $127 tax evasion and fraud and $583 from large enterprises (defined as large businesses with group turnover of more than $100m, even though the figure has since been changed to $300m)

This level of discrepancy is astounding. I questioned the Commissioner of the IRD about this figure when he appeared in front of the FEC yesterday, and asked if the law was confusing or if companies just got it wrong, all he said was words to the effect that the law is very complex and sometimes the companies don’t get it right. Wow.

As for large enterprises: don’t these companies either have in-house tax experts or employ high-end lawyers and accountants to manage their tax liabilities.? I could be wrong, and maybe the law is just too complex in this area, however, it looks like to me that some large companies may be manoeuvring to avoid their tax responsibilities.

Where the IRD finds a discrepancy between the tax self assessed by the tax payer and the liability determined by an investigation, a new assessment is issued by the IRD. The IRD notes that discrepancies fluctuate from year to year depending on the effect of large cases and the nature of the non-compliance the IRD has investigated. Perhaps either the law needs to be amended if it is causing such a level of confusion, or companies should be held to account if they are seen to be deliberately avoiding tax.

Filed under: Tax

Big yachts in Auckland

Posted by on September 16th, 2009

The previous government’s decision to fund the Americas Cup challenge was a bit controversial. Even my old mate McCully criticised it. Notwithstanding the fact that it was revenue +ve for the government. Because most of the funding comes from off shore and results in both PAYE and GST here.

And the challenge hasn’t been that smooth. Too many lawyers. But in the interim – and without any extra government funding the team has been doing well and we are going to get another of the alternative cup events down here early next year. Good little economic boost as well as some fun.

This is what Team NZ say:

Auckland will host a second Louis Vuitton regatta in March 2010.

Following the success of the LVPS regatta sailed in Auckland last February, Emirates Team New Zealand and other teams have been working with major sponsor Louis Vuitton to establish a top level series of regattas.

The first regatta of the Louis Vuitton World Series will be held at Nice, France, from November 7 – 22 this year. In March 2010 Auckland will host the second round and the third will he held at La Maddalena, Italy, in May.


IRD tax debt

Posted by on August 5th, 2009

Interesting to note that the latest Auditor General’s report titled “IRD: Managing Tax Debt”, highlights the fact that there are around 202,000 cases of tax debt totalling over $4b!  The bad news (as if this wasn’t bad enough) is that $1.82b is considered non-collectable, and about $1.606b (40%) is made up of penalties and interest.

Want to know the cost benefit of collecting debt? For the financial year ending 31 March 2009, for every $1 spent the IRD recovered $65. You would think that they would pump up the numbers collecting, but its okay, because the IRD is going to save about $60m over 5 years by making around 270 staff redundant.  We can all sleep at night.

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Filed under: Tax