Statement of Intent 2012-15: Full report - Inland Revenue Department

ird.govt.nz

Statement of Intent 2012-15: Full report - Inland Revenue Department

Statement of intent201215B-23 SOI (2012)


Crown Copyright © 2012This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. In essence, you are free to copy, distributeand adapt the work, as long as you attribute the work to the Crown and abide by the other licence terms. To view a copy of thislicence, visitcreativecommons.orgPlease note that no departmental or governmental emblem, logo or Coat of Arms may be used in any way that infringes anyprovision of the Flags, Emblems, and Names Protection Act 1981.legislation.govt.nzAttribution to the Crown should be in written form and not by reproduction of any such emblem, logo or Coat of Arms.ISSN 1176-6654 (Print)ISSN 2230-4053 (Online)ird.govt.nzPresented to the House of Representatives pursuant to section 39 of the Public Finance Act 1989.


CONTENTSMinister’s foreword and statement of responsibility 4Chief Executive’s statement of responsibility 5PART 1 – Commissioner’s introduction 7PART 2 – Our operating environment 11Nature and scope of our functions 12Managing in a changing environment 14PART 3 – What we want to achieve 17Our strategic direction 18IR for the future 19Performance measurement framework 20PART 4 – How we will achieve our goals 23Tax policy work programme 24Influencing voluntary compliance 25Organisational capability 29PART 5 – How we will measure our performance 33Measuring our performance 34ird.govt.nz3


Minister’s fOREWORd ANd STATEMENT ofRESPONSIbilityThe work of Inland Revenue has always been essential forthe smooth running of government. This role clearly remainscritical.As our economy shakes off the remaining effects of therecession and continues to support Canterbury’s recovery, it isimportant that New Zealand maintains robust taxes to financegovernment spending in ways that are as fair and efficient aspossible.The Government is committed to getting the country’sfinances in order, returning to a budget surplus and reducingour over-reliance on foreign debt. An efficient tax system isa crucial factor in raising the revenue that the Governmentneeds to meet its funding requirements, and we need a taxsystem that is flexible enough to accommodate future changes.Our tax system is well regarded internationally for itscoherence and simplicity, and it is generally acknowledged thatthe overall structure of our tax system is fundamentally sound.Work continues on progressively improving the tax system. TheBudget 2010 changes that shifted the weight of taxation fromincome to consumption will position our economy well forthe future, while Inland Revenue’s ongoing work on improvingcompliance ensures we all pay our fair share of tax.The Government wants a more cohesive public service andexpects Inland Revenue to play a pivotal part in this, throughefficient sharing of information, as appropriate, to help makethe public service run more smoothly.The Canterbury earthquakes have required Inland Revenueto work differently, with employees now spread across manydifferent sites in Christchurch. New working partnershipshave been developed with other government agencies, whichare leading to more joined-up services. From these, there arevaluable lessons for the future, not just for service provision inChristchurch, but across the country as well.While there are significant challenges ahead for Inland Revenueand the tax system, I remain confident that Inland Revenue willrise to these challenges.This Statement of Intent sets out Inland Revenue’s plans forhelping the Government to meet its economic and socialpolicy goals. I am satisfied that the information on futureoperating intentions provided by my department in thisStatement of Intent and the Information Supporting theEstimates is in accordance with sections 38, 40 and 41 of thePublic Finance Act 1989 and is consistent with the policies andperformance expectations of the Government.Challenges for Inland Revenue will arise from changes in theway taxpayers and the Government will want to interact withthe department.Inland Revenue’s computer systems were designed andimplemented at a time when the concept of electroniccommunication of tax matters was unheard of. Yet today,that is how a steadily increasing number of taxpayers wishto manage their tax affairs. In addition, a system originallydesigned solely for tax administration is now also used for childsupport, student loans, KiwiSaver and Working for Families.This has created significant system challenges.Hon Peter DunneMinister of Revenue4 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Chief ExECutive’s STATEMENT ofRESPONSIbilityIn signing this statement, I acknowledge that I am responsiblefor the information contained in the Statement of Intentfor Inland Revenue. This information has been preparedin accordance with the Public Finance Act 1989. It is alsoconsistent with the proposed appropriations set out in theAppropriation (2012–13 Estimates) Bill, as presented to theHouse of Representatives in accordance with section 13 of thePublic Finance Act 1989, and with existing appropriations andfinancial authorities.Robert RussellChief Executive and Commissioner of Inland RevenueCountersigned by:Scott ScoullarChief Financial Officerird.govt.nz5


Part onecommissioner’s introductionird.govt.nzPART ONEcommissiONER’s INTRODUCTION7


Commissioner’s INTROduCTIONInland Revenue’s mission is we contribute to the economic andsocial wellbeing of New Zealand by collecting and distributingmoney. Our success is reflected in two outcomes:""Revenue is available to fund government programmesthrough people meeting payment obligations of their ownaccord.""People receive payments they are entitled to, enabling themto participate in society.Responding TO gOvERNMENT PRIORITIESInland Revenue contributes to two of the Government’spriorities—building a more competitive and productiveeconomy, and delivering better public services within tightfinancial constraints.Our tax policy work supports the Government’s programmeto move the economy towards savings, export and investment,and away from borrowing and government spending. It willalso help our business transformation efforts, designed toenable customers to interact more easily with us, which in turnwill improve compliance.We work with other agencies to implement governmentpriorities and improve services to customers. We arecontributing to the Government’s result areas aimed atimproving interaction with Government, which are led by theMinistry of Business, Innovation and Employment 1 and theDepartment of Internal Affairs.We are working within tight fiscal constraints and have lookedclosely at all of our work to identify where we can improveefficiency and make savings, and we will continue to do so.Transforming THE WAy WE WORkOur business transformation programme is an importantinitiative to allow us to deliver on the goals set out in ourstrategic document IR for the future. The programme willdevelop projects, to be delivered across Inland Revenue, thatwill ensure the organisation will have the tools and practicesthat make IR for the future a reality.We are developing a transformation plan that will identifywhich capabilities we need to renew and which we will needto change. This plan will be presented to Ministers early in2012–13, after which we will prepare transformation businesscases.ImprovINg our SERvICESThe Government expects its agencies to provide better,smarter services. A key part of our response is to make it easierfor customers to self-manage. We believe that if we make iteasy for customers to comply they are more likely to. Theseservice initiatives are discussed in more detail in Part four. Weare also working with other agencies on a range of initiatives toimprove services to customers, including information sharingand co-location opportunities.Budget 2012 funding will be invested in additional complianceactivities, which will include greater focus on managingfraudulent activity, outstanding returns, overdue debt andaggressive tax planning.Continuing effECTS of THE CANTERburyEARTHquakesThe Canterbury earthquakes continue to have a significantimpact on our Canterbury staff and customers. We arecontinuing to work with other government agencies to supportthe community. We also have people still working on recoveryefforts and providing assistance through the Ministry of SocialDevelopment, Canterbury Earthquake Recovery Authority(CERA), Earthquake Commission and Recover Canterbury. Weare also working with the Ministry of Social Development toset up a joint call centre in Christchurch.Progress SINCE THE 2011–14 STATEMENTof INTENTDuring the past year Inland Revenue:""introduced new services, such as our new mobileapplication, which has helped increase the uptake of oure-services""exceeded our target returns on investment of our Budget2010 compliance work in debt collection, the hiddeneconomy and property transactions""had successful judgments in tax avoidance cases andpublished a draft interpretation statement on tax avoidancefor public consultation""introduced a biometric voice system, Voice ID, into our callcentre technology, which is providing improved security andcustomer experience""delivered better services to student loan borrowers byincluding a consolidated view of loan balances, which makesit easier for them to self-manage their loan1This new ministry, which merges the Ministry of Economic Development, Department of Labour, Ministry of Science and Innovation, and the Department ofBuilding and Housing, will be established on 1 July 2012.8 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


""launched our new enterprise desktop environment, whichhas streamlined and stabilised our desktop computersystems, improved information security and provided ourpeople with better tools to do their jobs""identified future capability requirements through strategicworkforce planning.ConclusionIt has been an honour for me to have served as Commissionerof Inland Revenue. I am proud of what the department hasachieved and am confident that Inland Revenue will continueto deliver services that meet the needs of the Government andour customers.Robert RussellChief Executive and Commissioner of Inland Revenueird.govt.nzPART onecommissioner’s iNTRODUCtion9


Part twoOur operating environmentird.govt.nzPART TWOOUR OPERATing ENviRONmENT11


NatuRE ANd SCOPE of our fuNCTIONSInland Revenue is New Zealand’s tax collection agency andcollects over 80% of core Crown revenue. We also have animportant role in administering social policy programmes,often with other government agencies. Our operations arefunded from Vote Revenue.revenue COllECTIONMost revenue comes from income tax and GST, but InlandRevenue also collects several special purpose duties andlevies. We also administer unclaimed monies. Figure 1 showstax revenue for 2010–11 and the Inland Revenue forecast for2011–12 to 2014–15.FiguRE 1–tax REvenueTax category 2010–11 2011–12 2012–13 2013–14 2014–15Actual IRD forecast IRD forecast IRD forecast IRD forecast$ million $ million $ million $ million $ millionDirect tax–individuals–company tax–otherTotal direct taxIndirect tax–GST–otherTotal indirect tax$23,136$8,195$2,582$33,913$12,575$357$12,932$23,353$8,204$2,913$34,470$13,943$365$14,308$25,422$8,586$3,143$37,151$14,007$358$14,365$27,689$9,078$3,525$40,292$14,377$360$14,737$29,617$9,414$4,094$43,125$14,746$362$15,108Total tax $46,845 $48,778 $51,516 $55,029 $58,233Note: IRD forecast is from the pre-Election Fiscal Update 2011.Social POlicy PROgRAMMESInland Revenue manages or shares the administration of thefollowing programmes:""Working for Families Tax Credits—we distributeentitlements to support working families. We administerthe programme with the Ministry of Social Development.In 2010–11, we paid $2.7 billion to approximately 200,000customers. 2""Child support—we develop policy and administer childsupport assessments and payments. In 2010–11, wecollected $420 million from paying parents.""KiwiSaver—we administer the scheme by collectingmember contributions and sending them to schemeproviders for investment. In 2010–11, we collected$2.9 billion in contributions from 1.7 million KiwiSavermembers.""Student loans—we collect repayments from borrowers.We jointly administer the programme with the Ministriesof Education and Social Development. In 2010–11,we collected $691 million in repayments from 621,000borrowers.""Paid parental leave—we make payments for theDepartment of Labour, to parents who take leave fromtheir job or business to care for a baby. In 2010–11, we paid$154 million to 26,000 parents.2Refers to customers paid weekly and includes payments from InlandRevenue and the Ministry of Social Development.12 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Our business fuNCTIONSProviding policy advice—we advise the government (with theTreasury) on all aspects of tax and on social policy measuresthat interact with the tax system, draft tax legislation, negotiateinternational tax agreements and forecast revenue.Delivering information services—we communicatewith customers about their obligations and entitlements,eg, through our website and online services, telephone servicesand correspondence. We also provide advisory services tocommunity groups.In 2010–11 we had:""16.1 million self-help service enquiries""5.5 million customer service contacts (telephone,correspondence and counter enquiries).Adjudicating and ruling on the law—we give customerscertainty about their tax affairs by giving guidance on thecorrect interpretation of tax law. We provide:""public rulings and statements, and taxpayer rulings""adjudications that help to resolve disputed assessments.LegislationInland Revenue administers the following major legislation:""Child Support Act 1991""Estate and Gift Duties Act 1968""Gaming Duties Act 1971""Goods and Services Tax Act 1985""Income Tax Act 2007""Stamp and Cheque Duties Act 1971""Student Loan Scheme Act 1992""Student Loan Scheme Act 2011""Tax Administration Act 1994""Taxation Review Authorities Act 1994""Unclaimed Money Act 1971""Parts of the KiwiSaver Act 2006""Parts of the Parental Leave and Employment Protection(Paid Parental Leave) Act 2002.Processing obligations and entitlements—we process highvolumes of registrations, applications, assessments, returns andpayments. In 2010–11 we processed:""8.0 million returns (47% of these were electronic)""8.1 million payments (62% of these were electronic).Managing compliance—we gather intelligence abouteconomic activities, follow up on outstanding returns andoverdue debt, and investigate individuals and businesses toensure that they are complying with their obligations.In 2010–11 we:""managed a tax debt portfolio of $5.5 billion""identified discrepancies of $1.45 billion in customers’ taxaffairs.Three business areas support Inland Revenue’s operations:""Corporate services—provides communications, financeand planning, human resources, legal, and risk and assurancesupport.""Information, design and systems—responsible for servicedesign and our it operations.""Business transformation—plans and manages thedevelopment of our future systems and processes.ird.govt.nzPART TWOOur operating environment13


Managing IN a CHANging ENvIRONMENTWe operate in a dynamic environment where domesticand international developments impact our business. Wecontinually evaluate our operating environment to identifyexisting and emerging trends and risks, which allow us torespond appropriately and ensure delivery of our services.Our CHAllENges and OPPORTuNITIESIR for the future sets out the following challenges which InlandRevenue faces and the ways we will position ourselves to meetthem and achieve our desired future. These should be read inassociation with the strategic risks on page 15.Reduce our cost of administrationThe Government’s fiscal position is likely to remain underpressure for some time. To help manage this, we are expectedto reduce our administration costs and deliver more for less.Over the past few years, we have reduced our administrativecosts and the size of the department through improvedefficiency and reorganisation. For example, we have:""introduced online services for individuals and student loancustomers that are efficient and deliver better services""significantly reduced per unit IT costs through increasedtransaction volumes and reduced costs.We will continue to identify and realise opportunities forsavings and efficiency improvements on an ongoing basis.Operating pressuresDeclining budgets will reduce our operating budget by$46 million over the next four years (see figure 2). Thisreduction, and $102 million in cost pressures over the sameperiod will present Inland Revenue with significant challenges.We have identified areas to address most of our cost pressuresover the next two years.In addition to managing our fiscal pressures, we will also deliverour efficiency savings. These savings will be met throughimprovements in the efficiency of our services and operations.Inland Revenue has a strong track record of delivering value formoney savings to the government, and we will deliver savingsto ensure core cost pressures are managed in future years.The nature of Inland Revenue’s business means we havevery limited potential to reduce or cease any of our currentprogrammes or reprioritise without negatively impactingon the revenue base, compliance and people’s access toentitlements. Inland Revenue looks for efficiency andcontinuous improvement within our core activities and workprogrammes.FiguRE 2–vOTE Revenue – OPERATINg Budget (Output ExPENSES)$ millions7006005004003002001000$691.913 $671.285 $654.342 $645.4752012–13 2013–14 2014–15 2015–16Maintain government revenue in a challengingeconomic environmentIn the recovery period following the global financial crisisand the 2008 recession, tax revenue declined and our debtportfolio increased significantly. Tax revenue as a percentageof GDP fell from 35.1% in 2006–07 to 31.0% in 2009–10. Thisis attributable to both policy changes and the global financialcrisis. Our tax debt portfolio grew 20% between June 2008and June 2011. Although the Canterbury earthquakes alsocontinue to affect economic growth, tax revenue and debt,the rebuilding of Christchurch is expected to be a major driverof economic activity and contribute significantly to economicgrowth in the next five years.Like all developed countries, New Zealand has threats to ourrevenue base from tax avoidance and tax evasion. We hadgood results both in addressing tax avoidance and tax evasion,particularly in the hidden economy. Our research points toa high level of acceptance of under-reporting of income insectors with a large cash transaction base. Our challenge isto identify and address serious non-compliance and influencesocial norms to ensure that people increasingly comply withtheir tax obligations.14 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Work across government to improve servicesWe are working with other government agencies to providebetter services to customers, including the Ministry of SocialDevelopment, the Department of Internal Affairs and theMinistry of Business, Innovation and Employment.Because we hold detailed information about our customers, wehave the opportunity to share information, where appropriate,with other government agencies to improve customer servicesand operational efficiency. This must be done in accordancewith the Government’s intentions and legislative provisions,which include maintaining the integrity of the tax system andprotecting New Zealander’s privacy.Respond to the challenges in an increasingly digitalworld and make better informed business decisionsDevelopments in information and communications technologyand increasing use of the internet as a service delivery channel,present issues with information security, privacy and identityauthentication. We are working on ways to mitigate risks, whileenabling appropriate information exchange methods.Inland Revenue is focusing on using electronic products andcommunication to deliver information and services in waysthat are easy for customers to use and deliver more costeffectiveservices. For example, our recent introduction ofB2B (Business to Business) web services enables us to efficientlyreceive and transmit large amounts of information with thirdparties and other government agencies. We also responded tothe increased use of smartphones and tablets by introducingour first mobile web application.As we introduce new systems and move towards customerdrivenand more joined-up government services, smarter useof information will be a strong focus. The way we collect, keepand use information, will continually change.We now have increasing opportunities to use information froma wider range of sources as well as making better use of theinformation we already have.See Part four for more discussion of our work to improveelectronic services and the way we use information.Improve the responsiveness and agility of systems thathold and process business informationWe rely heavily on information technology systems to carryout our responsibilities. Our ability to deliver policy changesand service improvements is limited by the age and complexityof our current systems. We reviewed our proposed businessimprovement initiatives to prioritise them for implementationand resource allocation.Managing our RISksWe revised our strategic risk statements to align better withour Enterprise Risk Management Framework and the sixstrategic priorities in IR for the future.FiguRE 3–Our STRATEgic RISksStrategic riskPeoplecapabilityInformationmanagementInformationtechnologyReputationFinanceRevenue baseExternalinteractionsStrategic risk management statementInland Revenue needs the right people inthe right place at the right time, now andfor the future.Inland Revenue needs reliable data andeffective management informationsystems and processes to make informeddecisions.Inland Revenue needs to apply timelytechnology solutions to meet our deliveryrequirements.Inland Revenue needs to maintain theconfidence of the public and Government.Inland Revenue needs to ensure futurecapital investment and operationalfunding is sufficient in order to provideservices, now and in the future.Inland Revenue needs to administer all taxand social policies to optimise revenuesand disbursements to support governmentobjectives.Inland Revenue needs to ensure thatcompeting priorities are managed whenworking together with other agencies andprivate providers.We regularly monitor our risk mitigations to ensure thatour risks are being addressed. In some cases, the mitigationapproaches will be covered by initiatives discussed elsewhere inthis document (see Part four), or by specific actions as part ofbusiness as usual.ird.govt.nzPART TWOOur operating environment15


Part threeWhat we want to achieveird.govt.nzPART THREEWHAT we WANT TO achieve17


Our STRATEgic dIRECTIONInland Revenue’s strategic direction is developed in thecontext of the Government’s priorities and our vision of beinga world-class revenue organisation, recognised for service andexcellence. In this section we look at the links between theGovernment’s priorities, our strategic document IR for thefuture and our Business Transformation Programme. We alsodiscuss the relationship between our outputs, the impacts ofour interventions and our outcomes.Government PRIORITIESThe Government’s priorities are to:""responsibly manage the Government’s finances""build a more competitive and productive economy""deliver better public services within tight financialconstraints""rebuild Canterbury.The Government has also announced ten result areas tounderpin its priority to deliver better public services withintight financial constraints. Two of these areas (relating to thetheme of improving interaction with Government) are relevantto Inland Revenue and the services we provide.""New Zealand businesses have a one-stop online shop for allgovernment advice and support they need to run and growtheir business (led by the Ministry of Business, Innovationand Employment).""New Zealanders can complete their transactions withgovernment easily in a digital environment (led by theDepartment of Internal Affairs).The lead agencies will develop specific and measureablefive‐year targets for each result area by 30 June 2012.We will contribute to the Government’s priorities through:""our work on the Government’s tax policy work programme""our contributions to the result areas aimed at improvinginteraction with Government""our work to influence voluntary compliance.18 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


IR for THE futureIn 2011 we launched our strategic document IR for thefuture, which sets out what we need to do to achieve ourmission, vision and culture, and the priorities for guiding ourtransformation process.The direction set out in IR for the future is based on theoutcomes that will reflect our success.""Revenue is available to fund government programmesthrough people meeting payment obligations of their ownaccord.""People receive payments they are entitled to, enabling themto participate in society.Our vision is to be a world-class revenue organisation,recognised for service and excellence. To be recognised forservice and excellence we aim to achieve the performancegoals that define a world-class revenue organisation—speed,certainty, compliance and value.Our long-term strategic planning takes into account a numberof external and internal challenges (see Part two).Our STRATEgic PRIORITIESOur strategic priorities focus on building our information andintelligence capability, improving our systems, aligning ourresources, and investing in the future skills required to enable aculture of service and excellence.""We retain, develop and attract high-calibre people with theskills required in the future – enabling a culture of serviceand excellence.""We proactively influence voluntary compliance and addressthe causes of compliance risk and threats through a range ofinterventions.""We move customers to cost-effective channels whilecreating an environment to make it easy for customers toself-manage.""We improve the efficiency and effectiveness of governmentthrough working with other agencies and private providers.""We use our information to make timely decisions and buildan intelligence-led organisation.""Our systems meet current and future needs.Our valuESOur values are the attributes and behaviours we have agreedare the most important to us in how we work.""Trust and integrity—we act with integrity, honesty andprofessionalism. This ensures that we continue to be one ofNew Zealand’s most trusted organisations.""Valuing people—we treat each other and our customerswith respect.""Innovating to make a difference—we keep finding newways to lift our performance and make compliance easier.""Working together—we work together and with otherorganisations to deliver better services and value.Our TRANSfORMATION gOAlsOur transformation goals help us to focus on the key featuresof our organisation in the future.""Efficient self-management options for customers thatprovide speed and certainty.""A broader approach to compliance based on smarter useof information and a wider range of interventions.""A range of different working relationships with otherorganisations, including strategic partnerships to deliversome services.""Less transactional work and less direct contact withcustomers.""Excellence in complex technical work.""More automation and streamlined information flows.""Greater use of commercial IT products in our systems andservices.""A healthy culture which our people value and thrive in.ird.govt.nzPART THREEWhat we want to achieve19


Our performance measurement framework demonstrates howthe outputs we produce make a difference and contribute to ouroutcomes. It outlines how we use our resources, directing ourefforts to the key areas outlined in our priorities, which contributeto our outcomes.future.Performance MEASuREMENT fRAMEWORkIn 2009–10, we developed an initial set of impacts of ourinterventions for the framework. This was on the understandingthat the impacts and the performance measurement frameworkwould evolve over time. During 2010–11, we carried out furtherwork to:Our performance measurement framework shows the" refine the impact statements, which resulted in fewerrelationships between the various elements that contributeimpact statements and greater clarification of the differenceto our performance. These relationships are between ourwe are aiming to make. We also clarified the relationshipmission, vision and outcomes, the impacts our interventionsbetween the impacts to show how they influence voluntaryand outputs have on customers, our strategic priorities and thecompliance (see “Our impacts” in the performancedelivery of value for money. The measures and indicators wemeasurement framework below).will use to measure our progress are in Part five.FiguRE 4–FIGURE Our PERfORMANCE 6 –MEASuREMENT fRAMEWORkPERFORMANCE MEASUREMENT FRAMEWORKOur missionWe contribute to the economic and social wellbeing of New Zealandby collecting and distributing money" refine the impact indicators, which resulted in an improvedset of indicators, the addition of baseline measurement and aperformance target for 2014. For details see figure 8." incorporate our mission, vision and priorities from IR for theOur priorities show the key focus areas we intend to direct ourresources to. This ensures that the outputs we produce make adifference to customer compliance (through our impacts) andmake progress towards our outcomes.The performance measurement framework also includes our focuson delivering value for money to government and our customers.We have a three-part approach to delivering value for money:" effectiveness—operating in a way that makes progresstowards our outcomes" efficiency—producing more for less or more for the same" economy—getting and using our resources as economically aspossible and using as few as possible.Our visionA world-class revenue organisation recognised forservice and excellenceOur outcomes – the goals we are aiming to achieveRevenue is available to fund government programmes through peoplemeeting payment obligations of their own accordPeople receive payments they are entitled to, enabling them toparticipate in societyValue formoneyOur impacts – the difference we want to makeWe improve complianceby ensuring:More customers are able toself-manageOur outputs – the activities we doServices to inform the public aboutentitlements and meeting obligationsMore customers registerand report accurateinformation when requiredOur priorities – the key areas we will direct our effort and resources toWe retain, developand attract high-calibrepeople with the skillsrequired in the future– enabling a culture ofservice and excellenceWe proactively influencevoluntary complianceand address the causesof compliance risk andthreats through a range ofinterventionsServices to process obligations andentitlementsCompliance improves if:More customers claim theircorrect entitlementsWe move customers tocost-effective channelswhile creating anenvironment to makeit easy for customers toself-managePolicy adviceMore customers pay and fileinformation on timeManagement of debt andoutstanding returnsWe improve theefficiency and effectivenessof government throughworking with otheragencies and privateprovidersWe use our informationto make timely decisionsand build an intelligenceledorganisationWe address non-complianceso that:The behaviour of noncompliantcustomersimprovesTaxpayer auditOur systems meetcurrent and future needsEffectiveness EfficiencyOur inputs – the way we use our resourcesPeople Systems AssetsEconomy22 NEW ZEALAND INLAND REVENUE ANNUAL REPORT 2011 ird.govt.nz20 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Delivering value for MONEyDue to the current fiscal constraints we must make sure thatour services are cost-effective and deliver value for money tothe government, and that our productivity is improving. Threeelements contribute to delivering value for money:""economy""efficiency""effectiveness.The initiatives we use to deliver value for money are in Part fourand the indicators we use to measure our progress in deliveringvalue for money are in Part five.""a migration strategy—the proposed approach and stages tomigrating Inland Revenue’s legacy applications to the targetICT architecture.""a high-level organisation impact assessment—an impactassessment of delivering the transformation programme andimplementing the target state operating model on people,process and technology.We expect to present the business cases to Ministers in early2012–13.BuSINESS TRANSfORMATIONOur business transformation programme is an initiative toallow us to deliver on the goals set out in IR for the future.In 2011, we established the Business Transformation Boardto strengthen oversight of the programme. The Boardhas representatives from the Treasury, the State ServicesCommission and independent external representatives. Itis chaired by the Commissioner of Inland Revenue and alsoincludes deputy commissioners.We are developing a transformation plan for completionin mid–2012. A specialist consultancy firm, Capgemini, isassisting Inland Revenue in the planning and analysis process.The transformation plan will show major milestones and have atimetable for future work. The plan will have:""an indicative business case—identifying the costs forprogramme implementation as well as the projectedbusiness benefits that the programme is intended to deliver.""a transformation plan—the approach, phases, workstreams, deliverables, resource requirements, key milestonesand timescales for the transformation programme, showinga “horizon” plan for the first 12–18 months, plus a high-levelthree-year plan and a five-year transformation roadmap.""initiative charters—high-level charters documenting theproposed approach, activities, deliverables, timescales,resources, objectives and scope for the initiatives in eachwork stream.""a business blueprint—a further iteration of the targetoperating model, defining the service catalogue of businessprocesses that each of the functions in the operating modelwill be responsible for delivering.ird.govt.nzPART THREEWhat we want to achieve21


Part fourHow we will achieve our goalsird.govt.nzPART FOURHow we will achieve OUR goals23


Tax POlicy WORk PROgRAMMEThe tax policy work programme for 2012–13 aims to help theGovernment achieve its priorities. Tax policy, which supportsthe Government’s programme, is developed in accordancewith the Generic Tax Policy Process (GTPP). The GTPP ensureseffective tax policy development through early considerationof key policy elements, revenue impact, compliance andadministrative costs. Consultation with private sectorrepresentatives is an integral part of the process.Factors considered during the development of the tax policywork programme for the next 18 months include a greateremphasis on “making the system work better” in terms ofsystem coherence and integrity, fiscal constraint and the needfor revenue sustainability, administrative efficiency and InlandRevenue’s business transformation. There is also emphasis oninter-agency work, such as information sharing (tax secrecy).The policy work programme also contains remedial and otherbase maintenance items required to protect the tax system.These are typically policy issues identified by Inland Revenue inthe course of delivering services.We will also continue to provide support to manage bills inParliament, including the:""Child Support Amendment Bill""Taxation (Annual Rates, Returns Filing, and RemedialMatters) Bill""Taxation (Income-sharing Tax Credit) Bill""Taxation (International Investment and Remedial Matters)Bill.High-priority projects on the work programme agreed with theGovernment include:""our business transformation programme""Canterbury earthquake issues""major base maintenance items (such as specified mineralmining, employee benefits, mixed-use assets and livestockvaluation)""welfare reform""a review of savings and investment taxation""a review of dividend rules for closely held companies""seeking mutual recognition of trans-Tasman imputationcredits""developing and implementing any Budget 2012 initiatives, asappropriate.24 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


InfluENCINg voluNTARy COMPlIANCETo manage the tax system effectively we rely on voluntarycompliance being the norm—most people are willing to meettheir obligations.Inland Revenue’s outputs and interventions:""contribute to the impacts we want to have on ourcustomers""influence compliance by enabling customers to self-manage""improve compliance behaviour by detecting and addressingnon-compliance.When people comply with their obligations and receive theirentitlements we progress towards our outcomes. InlandRevenue influences voluntary compliance through a widerange of approaches and activities, including:""tax policy development""using information to understand customer behaviour andcustomer service preferences""providing services that make it easy for customers tovoluntarily comply""giving appropriate assistance and advice to customers whowant to comply""detecting non-compliance and addressing it by takingtargeted enforcement actions where they are most effective.This section will show how we influence voluntary complianceand how our activities link to strategy, initiatives andorganisational priorities.FIGURE 5 –COMPLIANCE MODELBuilding an INTElligENCE-ledorgANISATIONOur use of intelligence, research and evaluation informationunderpins our approach to compliance management. Theinformation we gather helps us to understand compliance risksand what drives our customers’ compliance behaviour andtheir expectations. It guides our decision making by giving usa better understanding of customer segments at risk of noncompliance,service and channel preferences, and our costs.We will improve the way we use information by:""collecting a wider range of information from more sources""managing our data and intelligence as a corporate asset,improving the quality and integrity of the data""carefully managing information sharing with other agenciesto maintain customer confidence in the tax system andachieve cross-agency goals.Our research provides the expert knowledge that enables us tomake better decisions to inform compliance management andservice delivery in the future. We are focusing our research on:""understanding compliance behaviour""profiling customer groups to better target information orinterventions""collecting robust customer satisfaction and communityperceptions data.We also evaluate the results of our main programmes and usethem to inform the development of our future complianceactions.HIGHEconomicCustomerSociologicalHave decidednot to complyDon’t wantto complyuse full forceof the lawDeter bydetectionLevel of compliance costsBusinessPsychologicalIndustryFactors that influence customerdecisions and behaviourATry to, but don’tassist toalways succeedcomplyWilling to do themake itright thingeasyCreate pressure downLOWattitude to compliance Compliance strategyird.govt.nzPART fouRHow we will achieve our goals25


Delivering bETTER servICESDelivering better services for customers will make it easy forthem to comply and deliver better value for money to thegovernment. We will do this by:""making it easy for customers to self-manage their obligations""moving customers to cost-effective channels""delivering selected services through working with othergovernment agencies and private providers.We are making it easy to self-manage by reducing the need forcustomers to contact us. From April 2012:""student loan borrowers using our online services can see anup-to-date consolidated loan balance, including loans heldby StudyLink. Borrowers can also apply online for a specialdeduction rate or repayment obligation exemption if theyqualify.""student loans repayment obligations are being calculatedeach pay period instead of annually. For most student loanborrowers this has removed the requirement for an annualsquare-up of their loan repayments and consequently,reduced the need for borrowers to contact us.Reducing customers’ need to contact Inland Revenue is morecost-effective for us and means we can reassign our people tofocus on other priorities.We are also making it easy for our customers to comply withtheir obligations through developing and promoting selfserviceoptions. For example, our online services, Businessto Business (B2B) channel and SPK2IR 3 make it easier for ourcustomers to comply by providing:""more payment options""faster service and reduced waiting times""greater flexibility because customers can choose whento access our services rather than being restricted to ournormal operating hours""certainty that they have done the right thing, eg, receivingan automatic electronic confirmation that Inland Revenuehas received their information.During 2012–13 we will also be improving services for ourcustomers by introducing these new self-service products:""an online registration for new GST customers and an onlinereturn filing service, which will be tailored to GST customers’personal situations. It will include automatic calculations toreduce errors and customers will be able to save a draft andcome back to complete it later.""an eAlerts service, which will automatically remind GSTcustomers to file their returns enabling customers to dealwith Inland Revenue electronically. We will extend thisservice to other customers during 2013 and 2014.""a range of B2B services for PTS intermediaries and GSTcustomers.""an increased range of payment options including creditcards and direct debits.Giving customers certaintyAn important aspect of making compliance easy is giving ourcustomers greater certainty. We are providing certainty tocustomers by:""delivering faster rulings through improved rulings processes""automatically confirming receipt of electronic informationthrough our online services""progressively redrafting our guides in plain English to makethem easier for customers to understand""providing more of our forms and guides online, reducing thenumber of paper forms and guides we publish.These initiatives will help improve compliance and reducecompliance costs for our customers. They will also enable us toreduce our costs (eg, through reduced print production costs).This should also reduce the number of customers calling us toconfirm that they have complied with their obligations.3SPK2IR is Inland Revenue’s natural language speech recognition system.26 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Working with other agencies and providersWe are also working to improve the effectiveness and efficiencyof government through working with other governmentagencies and private providers. These initiatives will providebetter services to customers that are based on their needs andare easier to access.We are working with the Department of Internal Affairs andMinistry of Social Development to transition, over time, fromservices built around the structure of government agenciesto services based on the needs of customers. This will deliveron Government’s key result area of enabling New Zealandersto complete their transactions with government easily in adigital environment. The programme will promote innovativeservices for specific customer segments, take advantage ofnew technology and reduce service delivery costs for theparticipating agencies.In line with the Government’s desire to use information moreeffectively, we are exploring how we can share informationto help other government agencies improve services whilemaintaining customer confidence in Inland Revenue and thetax system. For example:""We are working with the Ministry of Social Development toprovide information about potential benefit overpaymentsand fraud under the framework set out in the Taxation (TaxAdministration and Remedial Matters) Act 2011.""We are exploring the possibility of an information sharingagreement with law enforcement agencies, which will shareinformation for enforcement-related purposes associatedwith serious crime.We are working with the Ministry of Social Developmentto set up a joint call centre in Christchurch. We look foropportunities to co-locate with other government agencieswhere it makes sense and is cost-effective.While we are increasing our work with other agencies toprovide better public services and improve compliance, wemust carefully manage how we share information to ensure wemaintain customer confidence in the tax system.Helping cuSTOMERS TO COMPlyWe assist customers who are willing to meet their complianceobligations but are unaware or uncertain about how to do so.We will take actions to influence customers’ compliancebehaviour by:""making customers aware of the compliance risk areas we willbe focusing on by publishing Inland Revenue’s ComplianceFocus 2012–13""educating customers about their compliance obligationsthrough community and business organisations""publishing industry benchmarks in our tax compliancework, particularly in the hidden economy 4""publicising our successful prosecutions for deliberatenon‐compliance.As we progressively move our more routine and reactivecustomer contacts to automated self-service channels,our customer services staff will have more time to focuson proactive work to improve compliance. This work willtarget the areas that our intelligence identifies as the greatestcompliance risk, and those that offer the best potential returnon investment.We will continue to focus on managing overdue returns anddebt through prevention and early intervention. Campaignmanagement is an important part of our approach, particularlyaround known compliance risks (eg, the 7 February and 7 Aprilterminal tax payment dates). The campaigns include actionsaimed at prevention (eg, reminder letters and text messages tocustomers before payments are due) and early intervention(eg, outbound calling to customers who miss a payment).Our focus on prevention and early intervention campaignsis cost-effective and efficient for Inland Revenue because itincreases on-time filing and payment and reduces debt growth.Our campaign approach enables us to contact larger numbersof customers.4Industry benchmarks are a tool to help businesses assess and improve theirperformance by comparing their business with others in the same industry.We use them to identify businesses that may be non-compliant.ird.govt.nzPART fouRHow we will achieve our goals27


Addressing NON-COMPlIANCEOur customers need to have confidence in our ability andwillingness to address non-compliance. This encouragesvoluntary compliance and maintains confidence in the taxsystem.We will continue to identify and audit customers with asignificant risk of non-compliance. We will identify noncompliantcustomers through a range of information andintelligence, including information from external sources, eg,international organisations and other government agencies.Our audit priorities and resources will be allocated to the areasof significant non-compliance identified by our intelligencework.For the few people who choose not to comply, we will respondusing the full force of the law by:""using a range of recovery methods where people havedeliberately filed incorrect returns, underpaid tax or claimedfalse entitlements""imposing late filing or shortfall penalties where appropriate""prosecuting the most serious cases of fraud or tax evasion.We are using a campaign approach in our initiative to improverepayment compliance from overseas-based student loanborrowers. We piloted this initiative in Australia and it willbe expanding to all defaulting student loan borrowers in theUnited Kingdom and Australia over the next three years. Weuse internet advertising, and tracing and collection activities byboth our staff and private sector debt collection agencies.We will also use a campaign approach to target noncompliancein the hidden economy and property trading andspeculation. We will use education and mailing campaigns,and audits and prosecutions where we find serious noncompliance.We will continue to concentrate on schemes designed toavoid or significantly reduce tax liability. In the comingyear we will continue to litigate large cases involving use ofoptional convertible notes or mandatory convertible notes tosignificantly reduce or avoid tax liability.28 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


Organisational CAPAbilITyTo work towards our outcomes, we need to have the rightpeople capability and infrastructure in place.People CAPAbilITyInland Revenue needs to retain, develop, and attract highcalibrepeople with the skills required now and in the future.We are focused on identifying and addressing our futurecapability requirements through our strategic workforceplanning. Our strategic workforce plan outlines our approachto people capability over the next four years. The plan focuseson four areas:""enabling a culture of service and excellence""transforming how we work""building capability for today and tomorrow""strengthening leadership.We will continue to focus on our capability planning workto prepare for a successful business transformation. Thiswork includes assessing our capability, culture and changeleadership. These assessments will help us design initiatives tosupport our desired future state.Strong leadership is critical to deliver successful transformation.We need leaders who provide clarity, change leadership and setclear expectations for our people. For example, we are trainingour people leaders to help them lead change, develop coachingskills and build strong performance. We will continue to alignour performance and development programmes with ourleader expectations.We will continue to advance our Future Direction ServiceDelivery project, which will enable us to deliver prioritisedservices to meet local needs.EEO and diversityRecognising the diversity of our workforce will be evenmore important in the future. If Inland Revenue’s employeecomposition reflects our increasingly diverse customer base,we will be able to access their knowledge to improve ourunderstanding of our customer needs and provide betterservices.We are reviewing our diversity framework to focus on theattraction and retention of a diverse range of people who bringdifferent perspectives, experiences and skills to Inland Revenue.Our pay and employment equity plan will continue to be partof our diversity scorecard. Our ongoing monitoring ensuresthat we consider pay and employment equity issues when weanalyse business and employee information.Systems THAT MEET our NEEdsIt is critical that our systems meet current and future needs ifwe are going to achieve a successful business transformation.Our increasing focus on providing better tailored services andimproving efficiency has significantly increased our relianceon electronic channels and associated it systems and services.We need the right tools, processes and it infrastructure toachieve our operational goals. Our ageing systems are puttingpressure on our ability to make system changes quickly andeffectively. We are developing a plan to address this, which willbe implemented progressively over the next five to ten years,guided by our business transformation programme. We alsohave an ongoing work programme to ensure system stabilityand reliability and to mitigate current and emerging it risks.Capital and ASSET MANAgEMENTINTENTIONSOver the next five to ten years our key focus area for capitalinvestment will be our transformation programme, whichwill enable our future business, and modernise our coreinfrastructure and systems.Inland Revenue is balancing the need to transform against therequirements of the existing policy change portfolio with theneed to maintain the existing infrastructure as fit for purpose.In the near to medium term our investment programmereflects organisational priorities and includes:""working with other government agencies to improve theway we deliver services""implementing policy and system changes that enable ourcustomers to interact easily with us, and also improvecompliance""implementing student loan and child support policy andsystem changes.Inland Revenue manages assets of over $731 million, whichhave a net book value of over $143 million. Most of theseare technology-related assets. They cover our infrastructure(eg, PCs, laptops, storage and servers), core tax systems (eg,FIRST, duties) and non-tax systems (eg, KiwiSaver, studentloan, Working for Families Tax Credits, child support and callmanagement technology).ird.govt.nzPART fouRHow we will achieve our goals29


FiguRE 6–HISTORICAl CAPITAl exPENditure2006–07 2007–08 2008–09 2009–10 2010–11Actual Actual Actual Actual Actual$000 $000 $000 $000 $000Property, 15,237 27,085 19,266 21,542 18,329plant andequipment 5Intangibles 6 58,713 82,789 42,453 38,122 19,249Total 73,950 109,874 61,719 59,664 37,578The Executive Board makes strategic decisions on capitalmanagement.Our planning methodology incorporates ways of identifyingand aligning future capital intentions with our need to investin tools and infrastructure. Where in the past we have madeinvestment trade-offs as we focused on policy implementationahead of upgrading key infrastructure assets, we are takingsteps to ensure that accumulated depreciation funds areused to maintain and safeguard our technology platform andaccommodation assets.There are four objectives that guide the priorities for capitalinvestment.""Implementing government policy changes—InlandRevenue advises the government on all tax and relatedsocial policy issues, and manages the implementationof new policy. Policy initiatives are normally funded by acombination of Crown funding and reprioritisation of ourcash reserves. The amount of this work affects both thefunding and resources available to invest in future-focusedtransformation.""Maintaining and/or improving our infrastructure—Thisinvolves replacements, upgrades and enhancementsto our it systems and infrastructure, motor vehicles,accommodation, furniture and equipment.""Changing what we do and the way we do it—We need toimprove core systems that were designed for tax collectionand have been progressively adapted over the years to copewith the addition of social policy programmes.""Delivering efficient and effective services—This involvesensuring that improvements not only meet the needs of ourcustomers but are delivered in a manner which is efficientand effective.The specific capital initiatives which will make up thetransformation programme will be determined through theplanning process currently under way and are not included inthe forecast expenditure assumptions noted here.Current and forecast depreciation reserves are insufficient todeliver the transformation programme our business requiresand are insufficient to meet the increasing costs of technologyreplacement (hardware and software).Figure 7 sets out our forecast capital expenditure basedon available cash reserves and funding decisions agreed byCabinet. The forecast excludes capital intentions that requirefuture Cabinet approval for additional funding. Any additionalfunding requests, such as future transformation initiatives, willbe subject to Gateway and Business Case processes.FiguRE 7–fORECAST CAPITAl ExPENdituRE ProgRAMME2011–12 2012–13 2013–14 2014–15 2015–16Estimated Forecast Forecast Forecast ForecastActual$000 $000 $000 $000 $000Property, 17,000 38,000 33,000 20,000 20,000equipment 7plant andIntangibles 8 48,000 66,000 55,000 53,000 52,000Total 65,000 104,000 88,000 73,000 72,0005Property, plant and equipment includes leasehold improvements and IThardware.6Intangibles includes software licences, and systems development andconfiguration.7Property, plant and equipment includes leasehold improvements and IThardware.8Intangibles includes software licences, and systems development andconfiguration.30 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


GovernanceThe Commissioner chairs the Executive Board which decideslonger-term strategy, policy, ethics, integrity, strategic risksand progress towards our desired future and outcomes. Inaddition, the senior management team meet weekly.The following governance groups support the Executive Board:""Portfolio Governance and Investment Committee—oversees the approval, initiation and implementation ofsignificant programmes/projects.""Business Transformation Programme Board—providesassurance that Inland Revenue business transformationinitiatives will meet the strategic needs of the organisation.""Technical Governance Committee—facilitates and ensuresthe coordination and consistency of departmental work ontechnical matters.In addition to the Executive Board and the supportinggovernance groups above, the Risk and Assurance Committeeprovides independent advice to the Commissioner oncarrying out statutory responsibilities and accountabilities.This Committee has an independent chair and includesindependent members to ensure objective advice.ird.govt.nzPART fouRHow we will achieve our goals31


Part fiveHow we will measureour performanceird.govt.nzPART Five How we will measURE OUR PERFORmance33


MeasuRINg our PERfORMANCEOur performance measurement framework (see figure 4)shows the links between the outputs we deliver, their impacton compliance, and the outcomes we seek. This sectiondescribes the main performance measures and indicatorsassociated with the framework. Where appropriate, we haveprovided the most recent actual data from our 2011 AnnualReport.Outcome INdICATORSInland Revenue’s outcomes and their indicators are shown infigure 8.FiguRE 8–OuTCOME INdICATORSOutcome indicator Actual 2010–11Revenue is available to fund government programmes throughpeople meeting payment obligations of their own accord• Revenue collected$47 billion• Student loan repayments$691 millionPeople receive payments they are entitled to, enabling themto participate in society• Working for Families Tax Credits paid $2,746 million 9• KiwiSaver funds distributed to providers $2,911 millionfor investment• Child support payments distributed $412 million• Paid parental leave distributed$154 millionImpact INdICATORSWe have developed a set of indicators over the past two yearsthat show the effect our interventions have on customers’compliance behaviour. To date, we have established baselinedata and set targets through to 2015. In setting the targets, wehave taken into account:""Inland Revenue’s strategic priorities and transformationgoals""Our operating environment including government priorities,the economy and changing customer expectations.Given the significance of our business transformation planning,once the indicative business transformation plan has beencompleted, we may revisit the Performance MeasurementFramework, and the impact indicators and targets.The impact indicators we will report against in our 2013Annual Report are in figure 9. Our baseline performanceagainst the impact indicators is on pages 24 and 25 of our2011 Annual Report.FiguRE 9–Our IMPACT INdICATORSImpact indicator Recent performance Target by June 2015More customers are able to self-manage% of customers who are aware of their obligations andYear end June 2011: 80% Increase to 85% or moreentitlements increases 10% of customers who find it easy to comply increases 11 Year end June 2011: 71% Increase to 75% or moreCustomer compliance costs are minimised 12 2009:Internal hours: 77External costs: $1,639Overall costs 13 : $5,557Factors that influenced target setting: This impact is key to enabling improved customer compliance and cost-effectiveness in afiscally constrained environment.9Includes payments from Inland Revenue and the Ministry of Social Development.10Indicator based on the department’s surveys of customer satisfaction and perceptions: customers are knowledgeable and confident with next steps, receivedaccurate information, and were informed of their rights and obligations.11Indicator based on the department’s surveys of customer satisfaction and perceptions: customers can easily access our services; perceive our systems, processesand procedures to be effective; and find it easy to get it right.12We report on this indicator to provide additional context. No formal target has been set.13Results are taken from SMEs compliance costs survey. Internal hours: time spent by businesses doing their own tax affairs. External costs: the amount paid bybusinesses to tax agents or advisors for tax services. Overall costs: the sum of external costs and the conversion of internal hours into dollars (including labourcost inflation).n/a34 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


FiguRE 9 (CONTINued)Impact indicator Recent performance Target by June 2015More customers register and report accurate information when required% of returns filed without errors increases July 2010 – March 2011: 86% Increase to 90% or more% of applications submitted without errors increases March 2011 – June 2011: To be set when more data is84% 14 availableRatio of registrations to population size and growth follows anappropriate trend 15Year end June 2011:Employers correlation of 99%,WfftC correlation of 67%GST assessed to customer spending follows an appropriatetrend 16 Year end March 2011:Correlation of 94%Factors that influenced target setting: The expected impact of the changes to WfftC eligibility rules has been taken into accountwhen assessing our ability to improve accuracy.More customers claim their correct entitlements% of accurate WfftC payments increases 17 Tax year 2010: 68% Tax year 2014:Increase to 70% or more% of customers confident that Inland Revenue takesappropriate action to ensure people receive their entitlementsincreasesYear end June 2011: 73% Increase to 80% or moreFactors that influenced target setting: This impact is key to improving customer self-management, reducing unnecessarycontacts and improving end-to-end processing.More customers pay and file information on time% of returns filed on time increases Tax year 2010: 82% Tax year 2014:Increase to 85% or more% of payments made by customers on time increases Tax year 2010: 87% Tax year 2014:Increase to 90% or moreFactors that influenced target setting: This impact is a key compliance driver and consequently, stretch targets are appropriate.The behaviour of non-compliant customers improvesThe compliance behaviour of customers who received an audit Year end June 2011:Maintain at 80% or moreintervention improves82%% of customers confident that Inland Revenue takes75% Increase to 80% or moreappropriate action against those who don’t comply increases% of collectable debt to total debt increases 69% Increase to 70% or more% of cash collected to collectable debt increases 65% 18 Increase to 70% or more byyear end% of collectable debt to revenue assessed decreases 8.1% Decrease to 7.0% or lessFactors that influenced target setting: The current economic environment is a significant factor in debt performance.Maintaining or making small improvements will be challenging.14Results are based on an initial sampling that began in March 2011.15We report on this indicator to provide additional context. No formal target has been set. The employers’ correlation is between the number of employersregistered for PAYE and the percentage of labour force that is employed. The WfFTC correlation is between the number of customers receiving payments from usand the number of households with dependent children.16We report on this indicator to provide additional context. No formal target has been set. Measure shows the link between consumer spending and the amountof GST assessed.17Payments are considered accurate if total yearly payments are within $1,000 of entitlement.18The current economic environment and our successful focus on prevention and early intervention has affected cash collection levels. There are fewer new debtcases, resulting in an older debt book, which tends to have lower cash collection levels.n/an/aird.govt.nzPART FiveHow we will measure our performance35


Output MEASuRESWe report on how well we deliver tax and social policy servicesto our customers using performance measures and targets.These are grouped under five output classes as follows:""policy advice""services to inform the public about entitlements andmeeting obligations""services to process obligations and entitlements""management of debt and outstanding returns""taxpayer audit.Our output measures cover standards for timeliness, quality,quantity and cost of our services. Activity forecasts, whichestimate customer demand for our services, provide contextfor our output measure results.Each year, we review our measures and targets to make surethey continue to reflect the range of services we provide, anychanges in our operating environment, and any feedback wehave received from external stakeholders, including AuditNew Zealand.We made changes for 2012–13 to include:""timeliness targets for issuing GST and income tax refunds""a measure and target for customer satisfaction with ouronline services""measures for processing and finalising employer monthlyschedules.We have also reorganised our policy advice output class toensure it aligns with the Treasury’s common definition of policyadvice. To do this, we moved ministerial services, drafting taxlegislation, and advice and design on operational policies thatdo not require ministerial decisions, to other ouput classes.Our 2012–13 performance measures and targets are set out inthe Information Supporting the Estimates of Appropriations2012–13, available from treasury.govt.nzMeasuRINg value for MONEyEconomyWe will continue to focus on finding savings in:""internal processes and ways of interacting with customers tofurther reduce printing, stationery and postage costs""travel and accommodation expenditure and making surethat we make the best use of video conferencing and othertechnology.We will also continue to reduce input costs by improvingprocurement processes and making sure that we maximiseuse of space in the properties we lease. We are also exploringopportunities to co-locate with other government agencies,where appropriate.EfficiencyWe measure efficiency by monitoring customer interactions,measuring the average cost of services, eg, customer-initiatedcontacts and returns processing, and by benchmarking ouroperations against other organisations.Our functional cost indicators measure the costs of our servicecustomer-initiated contacts, processing returns and childsupport administrative reviews. These measures track averagecost for our principal high-volume activities such as phonecontacts and processing returns.We first reported these measures in our Annual Report 2011.In the future, we will gain more insight into the factors thataffect these costs as baseline data becomes available andtargets are set.Figure 10 shows the actual results for 2010–11 and our targetsfor 2011–12 and 2012–13.FiguRE 10–FuNCTIONAl COST INdICATORS 19Indicator 2010–11 2011–12 2012–13Actual Target TargetCost per telephone contact $28.84 $31.00 $31.00Cost per correspondence $40.45 $41.00 $41.00contactCost per counter contact $35.12 $45.00 $45.00Average cost per customerinitiatedcontact$31.97 $34.00 $34.00Cost per income tax returnprocessedCost per GST returnprocessedCost per employer monthlyschedule processedAverage cost per returnprocessedCost of collecting an overduereturnCost per child supportadministrative reviewprocessed$5.14 $6.10 $5.20$1.84 $1.40 $1.60$4.86 $4.70 $6.20$3.77 $4.00 $4.00$9.43 $12.50 $15.00$630.22 $600.00 $750.0019Unit costs are fully costed and include the allocation of all overheads.36 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz


BenchmarkingInland Revenue often takes part in benchmarking exercises thatcompare its activities with other organisations. These studiesgive us insight into our relative efficiency and are importantways of exchanging information and ideas. Some recentstudies are:""the benchmarking initiative coordinated by the UK’sHM Revenue and Customs with Capgemini Consulting. 20In the study completed in 2011, Inland Revenue is rankedin the top three (out of 10 participating countries) for 26of the 42 (62%) indicators. It is not certain if this study willcontinue in future.""the OECD Comparative Information Series 21 , whichcompares tax administrations and provides detailedoperational and costing information, as well as discussionsof international best-practice models. We will participate inthe next study of this series planned for mid–2012.""Better Administrative and Support Services (BASS)benchmarking conducted by the Treasury. 22 Inland Revenuehas rated relatively well in the BASS benchmarks for thecost of our human resources, finance, and legal servicesfunctions. Our ICT costs are higher because of the sizeand complexity of our it systems. Inland Revenue’s resultsfor the quality metrics have consistently rated higher thanaverage for the BASS cohort.EffectivenessWe measure our effectiveness through:""our impact indicators, which measure the effectiveness ofour compliance interventions""evaluating our work programmes.Most of the evaluations done to date have followed up on theoutcomes from the KiwiSaver and the Working for Families TaxCredits programmes and the compliance costs faced by smalland medium enterprises. The studies are published on ourwebsite. 23 In future more emphasis will be placed on evaluatingcompliance issues, including:""initiatives to collect overdue repayments from overseasbasedstudent loan borrowers""the effectiveness of programmes targeting the hiddeneconomy""the effectiveness of using external agencies to collect taxdebt.20See hmrc.gov.uk/research/benchmarking.pdf21For the latest edition see Tax Administration in OECD and SelectedNon-OECD Countries: Comparative Information Series (2008), available atoecd.org22See treasury.govt.nz/statesector/performance/bass/benchmarking/2010-1123See ird.govt.nz/aboutir/reports/researchird.govt.nzPART FiveHow we will measure our performance37


MeasuRINg cuSTOMER SATISfACTION ANdPERCEPTIONSWe regularly survey customers to measure satisfaction with theservices we provide (telephone, correspondence and onlineservices) and their perceptions of Inland Revenue.Our customer satisfaction survey measures overall satisfaction,expectations, accessibility, personable and knowledgeablestaff, fair treatment, follow-up, and appropriate outcome. Thesurvey also measures topics related to community perceptionsof Inland Revenue and tax (eg, trust, fairness and operationaleffectiveness).We use some of the information from our customersatisfaction and perceptions survey for our outputperformance measures and impact indicators.Measuring our PEOPle CAPAbilITyOur people capability indicators show our performance overtime and compare us with other public sector organisations.We also measure statistics for equal employment opportunities(eeo).FiguRE 11–CAPAbility indICATORSBaseline results2006–07 2007–08 2008–09 2009–10 2010–11ComparisonFTEs 5,552 5,976 6,038 5,511 5,646 Establishment cap: 5,946Turnover 11.9% 12.0% 8.0% 7.2% 9.4% 2011 public sector average:10.9% 24Engagement(Mean score out of 5)3.75 3.83 3.90 3.77 3.77 2010 Gallup engagement survey databasefor New Zealand state sector:50th percentile 3.7375th percentile 3.99FiguRE 12–EEO STATISTICS2006–07 2007–08 2008–09 2009–10 2010–11% female staff 66% 67% 66% 66% 65%% female team leaders 66% 65% 63% 65% 64%% female managers 25 42% 42% 44% 46% 45%24State Services Commission, (2011), Human Resource Capability (HRC) Survey of Public Sector Departments (June 2011).25Includes managers down to the fourth tier of management.38 New ZEAland Inland Revenue Statement of intent 201215 ird.govt.nz

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