The manner in which we interact with Inland Revenue (IRD) is likely to change dramatically over the next two years as the upgrade of IRD’s IT system and associated legislation comes on-line. IRD’s broad objective is to reduce the amount of time and cost it and private business spends on tax administration by modernising its software platform.
At present, both GST and PAYE processing costs are higher than necessary and there are problems with the quality and timeliness of information submitted. These issues not only impose costs on employers and the IRD, but also limit the Government’s ability to provide effective social services.
IRD is currently working with third party software providers to design digital solutions that will integrate tax obligations into everyday business practices. To ensure the changes are well designed and beneficial to all parties, feedback is being sought on potential changes via discussion documents.
One of the most recent discussion documents outlines potential changes to GST and PAYE. The IRD is currently requesting feedback on proposed changes and poses several questions that are designed to challenge our thinking on the current approach. For example, whether changes should be made to the calculation of PAYE on extra pays, holiday pay and years that include an extra pay period?
GST related changes include the ability to allow GST return filing and payment processes to be integrated with digital accounting platforms. This would allow GST-registered persons to submit their GST returns through their chosen accounting software programme as they fall due, effectively eliminating the requirement to file a separate GST return as a separate process. Such changes would remove the need to double-enter information, and reduce the potential for error. IRD’s proposals also include making GST refunds via direct credit to a customer’s bank account compulsory, unless it would cause undue hardship or is not practicable.
PAYE could shift to a semi-automated process. Similar to the GST proposal above, businesses would be able to submit payroll information to the IRD direct from their accounting system and make necessary payments to the IRD at that time. For example, PAYE information could be submitted to IRD at the same time that a ‘pay run’ occurs. Under this design, employers’ PAYE obligations would be integrated with their current business procedures, eliminating certain processes such as the need to file nil employer monthly returns. PAYE payments to IRD might be due at the same time the employee is paid.
By increasing the quality and timeliness of the information provided, IRD should have greater capability to improve individual’s access to social entitlements and identify and prevent errors; such as overpayments of family assistance.
The changes represent a shift to a framework in which IRD’s system would no longer work on a stand-alone basis. Instead, IRD would ‘talk’ to software providers, ensure their system worked in accordance with its view of applicable legislation and would then accept what it was sent. Such changes would provide the business and IRD with greater confidence regarding the accuracy and correctness of a tax return.