New Zealand’s tax system is in a good place

February 3, 2012 New Zealand Taxation

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The Inland Revenue Department has released its briefing for the incoming Revenue Minister, saying that New Zealand needs to tweak the national welfare system and upgrade its tax infrastructure.

On February 2nd the Inland Revenue Department (IRD) released the briefing for the incoming Revenue Minister of New Zealand, outlining the current state of the national tax system, which it deemed as strong and stable, saying “…New Zealand’s tax system is in a good place. The tax bases are broad, robust and provide reliable sources of revenue to fund Government pro grammes. The broad tax bases and the relatively low tax rates make the tax system among the most coherent in the OECD.”

It was suggested to the Revenue Minister that the government needs to evaluate the overall effectiveness of the current tax system, and decide whether it would be beneficial pursue an extensive overhaul. The IRD explained that the entire tax system needs to remain well planned in order to ensure that any future tax policy changes are effective and in line with the country’s broader economic outlook.

Also, some improvement will be required to the national welfare system in order to reduce the number of taxpayers in New Zealand who rely on benefit payments. The IRD suggested that welfare payments should be changed in order to provide more incentive for beneficiaries to seek employment.

The IRD advised that it will also continue to make greater use of electronic contact with taxpayers, as a means of reducing the number of front line staff and loweing overall running costs while maintaining adequate levels of service and customer contact.

According to the IRD, in order for the Department to continue to function effectively it will need to upgrade its aging IT system, which was originally designed and implemented over two decades ago and was not intended to handle modern features in the tax system, such as Kiwisaver payments and the student loan repayment system. The IT upgrade is expected to cost up to NZD 1.5 billion, and take up to ten years.

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