While the New Zealand Government has committed to no new taxes in its current term, the minister of revenue is clearly interested in strategies to reduce tax compliance costs.

CA ANZ has long advocated for measures that will simplify tax compliance and reduce tax administration and compliance costs. Making compliance easier for those that want to comply and harder for those who don’t should be a given, yet our tax legislation is often overly complex, targeting those who have no interest in complying. In addition, our legislation is typically ‘one size fits all’, with limited allowance for smaller business taxpayers.

Rewriting and simplifying tax legislation would require substantive investment and is not a short-term fix. There are, however, more bite-sized actions that can make a real difference in the short term.

Here’s CA ANZ’s blueprint to reduce tax compliance costs:

• Review registration and relevant tax regime thresholds, and remove SME businesses and smaller taxpayers from compliance-intensive regimes where the tax at issue is a timing difference and will ultimately be paid. Prime examples include the financial arrangement rules and foreign investment funds (FIF) rules.
• Remove duplication and standardise election processes to simplify and benefit taxpayer certainty. For example, the land taxing rules currently include multiple but different exclusions for the main home and business premises. Taxpayer elections are a mishmash of ‘electing by doing’, i.e., taking a tax position or formal notification – including in different formats/means of delivery, frequency, and level of information required.
• Reimagine and simplify fringe benefit tax (FBT) as a buttress to the PAYE system, limiting its scope to in-kind remuneration. Motor vehicle benefit calculations are complex and disproportionate, and many employees would query whether they have received a benefit in relation to token items falling within ‘other benefits’.
• Make greater use of IT to achieve tax compliance savings and SMART (specific, measurable, achievable, relevant, and time-bound) data analytics to target and streamline tax audits.
• IR should not be afraid to go back to a wider view of what may be digitally possible as first canvassed in their document Tax Administration in a Digital World.
• IR’s SMART system should be an enabler to allow private sector innovation to streamline compliance and make better use of natural business systems to provide required IR data inputs. It is inefficient to require information to be reworked and submitted in a different format when already available. The automation of Payday filing and use of existing payroll systems is a great case in point.
• Embrace AI and related process efficiencies, enabling usage in a controlled way, while ensuring security and system performance issues are appropriately addressed.
• Ensure all information requested from taxpayers and required tax disclosures are appropriate. Specifically, information requested should be limited to what is needed and will be used. Information should not be requested where IR already has that information or access to it from another government agency, or if it already exists in the public domain. IR should also be mindful of taxpayer costs to comply when asking for information and consider what cheaper formats or variations may be used to achieve its objectives.

A focus on compliance cost reduction can deliver real savings, and efforts in this area should not be discounted. Everyone benefits from a more effective and efficient tax system.