Tax administration – how taxpayers, intermediaries and IR interact in the 21st century – is ready for an overhaul. The Tax Administration Act 1994 is a product of an analogue era and later amendments have struggled to keep pace with rapid digital change, let alone improving the system.

Technology, digital interactions, AI and new intermediary models create both risks and opportunities for the tax ecosystem. We therefore need a robust tax administration framework with appropriate controls and safeguards, while also enabling innovation and reducing compliance costs.

State of play

IR’s business transformation and START system should provide a springboard for meaningful reform. That is part of the dividend envisaged when government made its substantial technology investment. Greater integration with natural business systems will be central to reducing tax compliance costs.

There are limits, however. New Zealand must maintain the existing tax system while modernising it. We cannot start again with a blank sheet of paper. Estonia is often cited as having one of the world’s most efficient tax systems, but that is partly because it started from scratch and operates relatively simple tax settings.

Even so, IR has spent much of the past decade considering options to modernise and simplify tax administration. In February 2022, it released the officials’ issues paper Tax Administration in a Digital World, which outlined a broad vision of the possibilities in a digital environment.

Since then, progress has been slow. IR’s work has focused on intermediaries, a relatively small part of the wider reform task. At the same time, digital and AI-related projects have continued. Those streams are likely to converge, yet IR now appears to be reacting to private-sector technology change, rather than setting the direction.

New discussions

The latest step is IR’s consultation document, Proposed Legislative Changes for Intermediaries, released on 1 May 2026. It proposes changes to address current issues in the intermediary space. Its objectives include:

• Recognising the growing role of digital service providers and other intermediaries
• Creating a more flexible framework that can adapt to new business models
• Protecting the integrity of the tax and social policy system through appropriate standards and accountability
• Reducing compliance costs by aligning rules with how services are delivered in practice
• Enabling more targeted regulatory responses, while retaining core safeguards.

CA ANZ supports legislative change that improves clarity, practicality and efficiency. But reform should not be made piecemeal or in isolation. Although the paper refers to a flexible regulatory framework, it says little about how that framework would be developed or how far it would extend.

What is needed is an overarching framework for tax administration that sets out a broader vision, provides context and lays the foundation for reform. It should be future focused and explicitly incorporate technology and AI. That would give coherence to future tax administration rules and help ensure changes are aligned, rather than incremental.

The intermediary problem

The paper proposes adding specific new intermediary categories to deal with current needs. While improving the legislative settings for existing intermediary types makes sense, this should be seen as an interim measure, rather than the end point.

A more durable approach would define intermediary categories by activity, rather than by entity type. For example, a digital service provider category could capture the activities of several existing or proposed intermediaries, while also allowing flexibility for future developments.

Whatever approach is adopted, consistent treatment across intermediary categories is essential. Similar activities should face similar obligations, while still allowing for differences in risk profile. That is important for fairness and for maintaining confidence in the framework.

CA ANZ’s preference would be a comprehensive review of New Zealand’s tax administration settings. A rewrite of the Tax Administration Act for a digital world would be a fitting conclusion to that work.