Lessons from Down Under

Published on 31 December 2008

Although inevitably a much smaller economy than the UK's, New Zealand faces many of the same tax problems. Its ways of solving problems of tax administration have often been innovative and influential on UK thinking. A recent 'State of the Nation' paper gives further food for thought.

The land of the long white cloud, the All Blacks and the Lord of the Rings films has recently undergone a change of government. As happens in the UK, and no doubt in many other countries, the local tax authority prepared a memorandum for the incoming Minister of Revenue (i.e. the new political master for the tax system) on what he was letting himself in for.

This (surprisingly readable) 57 page guide (see link below) gives a good summary of the New Zealand tax system and the issues it faces but, instructively, also sets out the principles that guide the running of the system. Leaving aside consideration of whether 57 pages would suffice for a summary of the UK's tax system, there are perhaps some useful pointers for those running the UK system.

Key factors

Right at the start of the New Zealand paper are listed six 'key factors that contribute to a good tax system'. In short, these are:

  1. There should be clear and well understood tax policy and legislation.
  2. Taxpayers should receive high levels of service and timely responses from good, technically competent and receptive people.
  3. Finding information and receiving assistance should not be a struggle for taxpayers.
  4. The tax authority should be able to anticipate and respond quickly to policy and administrative changes.
  5. It is attractive to ensure that tax is levied at low rates over broad tax bases.
  6. A good tax system is characterised by high levels of voluntary compliance.

For the UK's low income community, the second and third of those principles will certainly resonate.

Websites increase telephone traffic

Understandably, the NZ Inland Revenue, like our own HMRC, is facing cost pressures and is trying to use electronic means to make dealings between taxpayers, advisers and authority simpler and more efficient. The memorandum notes that there has been a 'positive growth in the uptake of the department's self help services' (i.e. the various do-it-yourself routes), but that the number of phone calls has also increased and is putting considerable pressure on the department.

These telephone contacts are 'increasingly more complex in nature' – perhaps hardly surprisingly, given that life is more complex and the use of websites etc. tends to filter out the simple questions. They are clearly looking at trying to be as efficient as possible and their mention of a technology called 'Virtual Hold' in its call centres (which allows callers to choose to receive a phone call rather than wait online) would be welcome over here.

It is also telling that, despite the investment in the website approach, the NZ authorities see a considerable upsurge in the number of enquiries they receive following up website information – taxpayers want to confirm the information they have found on the website or take the issue partially solved through to a conclusion. In other words, however good the website is, it's not going to solve all the questions and may, in part, serve to increase the volume of focussed questions.

We all support the way HMRC in the UK has vastly increased the information it displays on its website. We might however question the way it is displayed and the language used. But the lesson is very much that it can't be a complete solution to people's problems – and as the New Zealand memorandum notes, there are still plenty of people who want traditional methods of contact.

Five key functions

It's also worth noting that the memorandum sets out the five key functions that the New Zealand tax authority sees itself performing:

  1. Collecting tax to finance government spending.
  2. Redistributing income in line with the government's equity objectives.
  3. Delivering specific programmes such as tax credits.
  4. Helping make the NZ economy competitive.
  5. Building trust and confidence in the public sector.

These aims do seem to have some resonance with the recently published HMRC vision but are in many ways simpler and more direct. The emphasis on 'trust and confidence' is something that no doubt taxpayers the world over would like to see their tax authority embrace.

A message for the HMRC drafting team

No doubt minds in HMRC are already registering that they may have to prepare a similar memorandum at some stage in the next year or so. The New Zealand example should be required preliminary reading for those charged with writing the UK equivalent. It would also be good to think that the prospective writers did some consultation with a range of user groups of those interested in the tax system and, of course, undertook to publish the result.

Indeed, the document that emerged might prove to be a more enduring and widely useful manifesto than whatever political ones are produced in the run up to the next Election.

(31-12-2008)

Contact Name: John Whiting (Tel: 0844 579 6700 Fax 0844 579 6701)

To open the file click below:
Summary of New Zealand tax system