Reader’s to this RIS This document covers 9 discrete proposals which have been grouped into three themes. To manage this large number of topics we have shifted the detailed analysis of each theme, and the component proposals within that theme, out of the Regulatory Analysis section and into a set of three appendices. The body of the RIS still contains an overview of the options considered but the detailed analysis of the costs, benefits, impacts and recommendations is contained in the corresponding appendix. Within the overview tables the following symbols are used:  Significantly better than the status quo  Better than the status quo  No better than the status quo  than the status quo The consultation section of the RIS provides a summary of our consultation approach with the feedback received on each proposal set out in corresponding appendix. STATUS QUO AND PROBLEM DEFINITION Inland Revenue’s transformation programme The Government’s objective for the revenue system is for it to be as fair and efficient as possible in raising the revenue required to meet the Government’s needs. For taxpayers the tax system should be simple to comply with, making it easy to get right and difficult to get wrong. It should serve the needs of all New Zealanders, put customers at the centre and help them from the start, rather than when things go wrong. The to digital and greater globalisation has reshaped how businesses and individuals interact and connect, and their expectations of government. Businesses are increasingly using software packages to automate processes and reduce their compliance burden. Businesses have consistently ranked tax as their highest compliance priority, and it often contributes the most to their overall compliance burden. Compliance costs could be reduced by making better use of businesses’ everyday processes and systems to meet tax obligations. Enabling businesses to spend less time on tax and more time on running their business will support Government’s wider goals of building a more competitive economy and delivering better public services. The ways in which individuals work has changed with different types of employment and working arrangements. The New Zealand workforce has become more casualised as permanent employment has become less common, and temporary, casual and contract work has become more prominent. Other trends include part-time and temporary workers
Options Fairness and equity Efficiency of compliance and administration Sustainability of the tax and social policy system Basis for improved social and other government services Fiscal Status quo Only the largest employers are required to remit PAYE more often than monthly and all but the largest are eligible for the payroll subsidy. All employers provide PAYE information in the following month. Multiple thresholds can impose higher compliance as obligations change progressively. Multiple thresholds impose higher administrative than a single threshold would. The need for legislative amendment to change the threshold reduces the flexibility of the tax and social policy system. Delayed provision of PAYE information does not provide a basis for improved social and other services.
One PAYE threshold of PAYE and ESCT Better than the status quo This option supports payday filing and remittance should reduce costs for those using software. The threshold exempts the majority of micro and small employers from payday filing and remittance requirements but allows them the choice of whether to use the new systems. Significantly better than the status quo All but 2.7% of employers over this threshold are already payroll software and should experience a decrease in overall compliance costs compared with the status quo. Administration costs should reduce. Significantly better than the status quo Threshold would see pay period information reported on payday for majority of employees. Order-in-Council to change the threshold allows for more flexibility. Better than the status quo PAYE information received on payday is the best basis for improved services. This option is better than the status quo and although it does not require as many employers to file PAYE information on payday as options 3 or 4 does it would result Greater targeting of the payroll subsidy would save $3.1 million over four years from 2016/17.
$500,000pa of PAYE and ESCT for frequency of remittance $50,000pa of PAYE and ESCT threshold for electronic filing, all employers required to file PAYE information on payday. Payroll subsidy repealed. No better than the status quo. Does not require payday remittance. The lower threshold for electronic filing would impact on approximately 6,000 employers; many others below this threshold are already filing electronically. The requirement for payday submission of information may negatively impact on fairness for small employers using manual systems Better than the status quo Compliance savings should be available to all employers who can access digital services. While this potential exists there will be costs to upgrade and some employers will continue to use manual systems and will incur increased compliance costs as a result. Administrative costs should reduce compared to the status quo but they may be higher than under option 2 because of the receipt of more paper schedules. Significantly better than the status quo As Significantly better than the status quo This option would require PAYE information to be submitted on payday for 100% of staff. Saving of $8.1 million over four years from 2016/17.
Options Fairness and equity Efficiency of compliance and administration Sustainability of tax system Fiscal 1. Status quo with no threshold above which taxpayers are required to file GST returns electronically. All GST registered persons and businesses can choose whether to file GST returns electronically or on paper. Compliance and administrative costs depend on the level of uptake of voluntary electronic GST return filing within the new START system. 2. Introduce a framework that allows for an electronic filing threshold to be set for the filing of GST returns by No better than status quo. Fairness and equity will be considered when the level of the threshold is set. Significantly better than the status quo. Compliance and administrative costs are lower than under the status quo. Better than the status quo. Electronic GST returns are processed faster. No impact. 3. Introduce a filing penalty of $250 as part of the framework under option 2. Better than the status quo The level of penalty is consistent with existing thresholds for larger businesses such as the late filing penalty for GST returns and the existing minimum filing penalty in relation to PAYE. Significantly better than the status quo. Encourages taxpayers to file electronically when required and recovers the additional costs of administering paper returns. Better than the status quo. Encourages taxpayers to file electronically when required which enables faster processing of GST returns. No impact at this stage – may have impact when a threshold is set and implemented in the future.
Options Fairness and equity Efficiency of compliance and administration Sustainability of the tax and income- related social policy system Basis for improved social and other government policy Retain the status quo: No date of information, contact details only from those in or eligible for KiwiSaver and no ability for employer to pass on information already gathered from an employee. Employers are required to act as the middleman between Inland Revenue and an employee when identity cannot be confirmed and this imposes considerable compliance costs. The current rules require employers to collect multiple forms from new employers for IRD and in some cases employers have to transcribe them and pass the information on to Inland Revenue. Incorrect IRD numbers and out of date contact details impose considerable administrative costs. The quality of contact and identity information currently held in the tax system for employees is not sufficient to support modernisation. To the extent that identity or contact information is incorrect Inland Revenue and other agencies will be unable to contact taxpayers to offer improved services. Require date of birth and contact detail information for all new employees and enable employers to pass on information already gathered. Better than the status quo Better than the status quo Option 2 requires the employer to source and/or pass on additional information however for employers payroll software the compliance costs should be outweighed by being able to send the information already gathered for their own purposes from the payroll system and/or from reduced rework. Administrative costs will be reduced by better identity and contact information. Significantly better than the status quo Obtaining date of birth information for new employees and contact details for all new employees will contribute to the sustainability of the tax system. Significantly better than the status quo. Delivery of improved services is dependent on sound identity and contact information for individual taxpayers and this option should deliver improvements.