- Peter Mersi was appointed New Zealand tax commissioner in July 2022, for a five-year term.
- His extensive experience with Treasury, as well as positions with Land Information and the Ministry of Transport, have given him a holistic view of regulation, legislation, policy and how the government system works.
- With an election coming up, Mersi is looking at the medium- and long-term challenges facing Inland Revenue, and how New Zealand’s tax system might respond.
With stints working in Treasury, Land Information and the Ministry of Transport, many might think New Zealand tax commissioner Peter Mersi had a public sector career all planned out from the get-go. However, in some ways Mersi is an ‘accidental’ public servant who has been deeply engaged by the big, complex problems and opportunities the sector offers.
A born-and-bred Wellingtonian, Mersi doesn’t have a family connection with public service. His immigrant Italian father worked “a whole range of jobs”, while his mother worked mainly in retail. His first encounter with the public service came with university. “It was giving away scholarships, and there was a guaranteed job when you came out,” Mersi remembers.
After his OE (overseas experience) – a traditional rite of passage for most Kiwis – Mersi left the sector. “I’m an economist by background and decided I wanted to do more pure economics, so I went and worked for a bank for three years,” he says. “My timing was impeccable because the 1987 share market crash happened just after I joined the bank. I was made redundant in 1990 and basically drifted back into the public sector through a contract job and then a policy job.”
Mersi thought he would move back to the private sector. Instead, one intriguing role led to another.
“I became fascinated by the complexity of the problems and how to navigate your way through those in a way where you came out the other side with something that was better than what you started with,” he says. “That’s really what has kept me engaged the whole way through: really hard problems, multiple objectives and the need – because it’s a system – to iterate to something that is better.”
Understanding the system
Mersi says he’s been lucky to hold roles that have taught him many of the essentials that underpin the challenging role of tax commissioner. His 14 years at Treasury and time as secretary of transport and chief executive of the Ministry of Transport meant he learned a lot about regulation, policy and how governments operate.
Working in multiple government organisations, Mersi has found that in some ways the actual ‘content’ of the work isn’t the key factor.
“Every area is really fascinating and each one creates both opportunities and challenges,” he says. “The question is, how do you manage your way through those?”
He points to his extensive experience with Treasury as particularly valuable for his latest role.
“I guess I’ve built up a reasonable understanding of what it means to be a regulator and what it means to be a monetary regulator: how you think about it from the policy end, the advice that creates the right sort of legislation, and how you need to think about using all of the tools available to you to ensure that you are delivering.
“I have a very keen interest in the system and tax revenue is a key part of the system.”
Getting it right
While government can sometimes move quickly, the wheels of the public sector typically grind slowly.
“Whenever I bring on someone from the private sector, I always tell them they’re going to be frustrated with how long some things take,” Mersi says.
However, he stresses there’s usually a good reason for a methodical approach.
“In the public sector, failure often has a real impact on real people,” he says. “In the private sector, failure might follow if you’ve tried to increase a bottom line or customer satisfaction, but if it doesn’t work you can move on quickly. The ramifications of getting it wrong can be more severe in the public sector.
“So, there are good reasons why we take time and there are good reasons why we are transparent, but to me that all adds to the complexity and the richness of the challenge.”
A smarter tax system
Like many other tax offices worldwide, Inland Revenue (IR) has been through an extensive business transformation process; in fact, Mersi joined IR the day after the project closed. The result is a streamlined, mostly automated tax return system for clients with simple tax matters, plus lots of tools and analytics to help IR gather information and spot outliers and issues.
Mersi says the people responsible for the transformation program can take a lot of credit.
“It’s really important that people believe in the tax system, and I think most people don’t mind paying their share of tax because they know what it’s for. Our objective is to help them get it right,” he says.
“It’s really important that people believe in the tax system, and I think most people don’t mind paying their share of tax because they know what it’s for. Our objective is to help them get it right.”
“Sometimes someone might have done something inadvertently wrong. Some of that data [we can access] is helping us identify what’s happening, and we can either go to individuals directly or our staff can do things to help those people get it right.
“Ultimately, people want to know that everyone is paying their share and that if someone isn’t, they will be held accountable.”
While New Zealand is moving on from COVID-19, recent natural disasters continue to make things difficult for some taxpayers. Mersi says IR is still open to supporting people impacted by these types of events, whether that means deferred tax payments, payment plans, removing penalties or other solutions.
“Our objective in the legislation is to maximise revenue. If we can help a taxpayer through a difficult period we will, with the expectation that they will continue to be a good citizen and taxpayer in the future.”
In October last year people in Wellington protested against the government’s plans to tax emissions from farm animals.
Engaging with business
The expectation of fairness not only applies to individuals paying their fair share. Increasingly, the media has drawn attention to whether businesses – especially multinationals – are contributing what they should to the tax coffers.
Mersi says IR has had “a positive response from big corporates in New Zealand” and says the base erosion-shifting rules are making a real difference. That said, international tax remains a complex and challenging area.
“We have an active engagement through the OECD [Organisation for Economic Co-operation and Development] and we’re very active in sharing data,” he says. “We will continue looking out for the electronic sales suppression tools that you are seeing around the world and we will want to stamp on that very quickly. It’s a case of remaining vigilant, and working with like-minded countries and the tax community. Our tax partners have a significant role to play in helping us maintain the integrity of the tax system.”
The long view
Mersi is also thinking about the medium- and long-term issues facing IR. With an October 2023 election looming, he says some of the challenges aren’t so much tax related as trust related.
“We have to be mindful of the role we play and how we support trust in government – not trust in a particular government, but trust in the institution and in the integrity of the tax system,” he says.
“We have to be mindful of the role we play and how we support trust in government – not trust in a particular government, but trust in the institution and in the integrity of the tax system.”
One useful tool is the new long-term insights briefings: apolitical briefings on a topic, produced every three years.
“That helps provide a launching pad for us because, as a country, we do have some pretty big challenges that will have implications for revenue and expenditure over time,” Mersi says. “We need to have informed conversations: what is the tax system of the future going to look like? In the next five, 10 or 20 years, as a society, what do we want?
“There are some really good challenges for us, and we have some tools that will help us start to have those conversations in advance and position [Inland] Revenue to be able to respond to them.”
With less than a year in the job, he says he’s still getting his head around the long-term issues, exactly what they look like and how best to ensure New Zealanders have conversations around them, as a community.
“The days when we thought there was one solution to a problem are long gone,” he says, “and tax, in particular, is a very complex beast. I look forward to engaging on some of those questions.”
A message for CAs
IR works closely with many chartered accountants, and Mersi says he really appreciates the work they do.
“I know from conversations I’ve had that they are just as focused on tax integrity as we are.
“On that front, I think I’d encourage them, despite all the pressure, to keep a focus on the timeliness of the data. The information we gather is used for tax purposes, but it’s also often shared and used for other decision-making – for instance, by Treasury. So, it’s really important that the data is as accurate as it can be, so that good decisions can be made.”
Certainly, he sees tax agents as part of the greater IR team, and an essential part of the tax system.
“We’re entering an election period, and we don’t know what changes will come at us in the future and how they will challenge the profession,” says Mersi. “Working together, we can usually find ways to put things in place and work out what we have to do.”
Bio in brief
Name: Peter Mersi
Location: Wellington, New Zealand
Current position: New Zealand tax commissioner
Previous roles: Secretary and chief executive, Te Manatū Waka – Ministry of Transport (New Zealand); chief executive, Land Information New Zealand; acting chief executive, Department of Internal Affairs; deputy commissioner business transformation, Inland Revenue; deputy secretary, New Zealand Treasury.
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