Tax System Receives Good Review From IRD
November 13, 2014 New Zealand Taxation
The IRD has evaluated the New Zealand tax system, rating it as efficient and well-functioning, but has pointed out some upcoming challenges.
On November 12th the Inland Revenue Department released its Briefing for the Incoming Minister of Revenue – 2014, detailing the strengths of the current tax system in New Zealand, and describing the changes which may need to be implemented in the foreseeable future.
According to the IRD, the state of the current tax system in New Zealand is generally positive, and the current ‘broad-base, low rate’ approach to taxation is efficiently allowing tax rates to be kept as low as practical, while simultaneously making system easy to understand, administer and implement.
It was specifically noted in the Briefing that even though tax rates are being kept low, the New Zealand tax system is still progressive and in line with the standards of comparably developed countries, although the government still has an opportunity to make the tax system even more progressive.
However, while the tax system is currently efficient, the IRD conceded that in the long-term New Zealand will see a rise in the funding requirements for health care and social security, meaning that the government will need to raise its revenues either through deeper spending cuts, or through additional taxation.
The IRD made specific mention of its planned upgrade of its administration systems, describing the update as a “…once-in-a-generation opportunity to modernize our tax and social policy administration”, allowing not only an overhaul of the tax administration facilities but a complete reform of how taxes processed in the country.
Photo By: Simon Cunningham