Durability and resilience GST is durable as it has been in place for 30 years. In that time, the rate has been increased twice. It is a well-regarded scheme because its comprehensiveness and simplicity assist compliance and administration. Fairness and accountability See comment in the revenue raising and collection assessment. Working for Families tax credits System description Working for Families is a package designed to help make it easier to work and raise a family. It pays extra money to many thousands of New Zealand families. Greater financial support is available for: almost all families with children, earning under $70,000 a year; many families with children, earning up to $100,000 a year; and some larger families earning more. There are four types of tax credits: family tax credit; in-work tax credit; minimum family tax credit; and parental tax credit. Inland Revenue administers the programme jointly with the Ministry of Social Development. In the 2015–16 financial year, we distributed $2.4 billion in entitlements to support families. Key legislation Income Tax Act 2007 System agencies Inland Revenue (Policy and Delivery) Treasury (Policy) Ministry of Social Development (Policy and Delivery) Effectiveness The Working for Families tax credit system (WfF) is generally effective in providing low to middle income families with regular payments. Payments are easy to apply for and the majority of services are available online either through Inland Revenue or MSD. Around 70 percent of New Zealand families with dependent children receive Working for Families tax credits either through Inland Revenue or MSD. In order to receive regular payments families must estimate their anticipated earnings for the coming tax year – this can be difficult and an incorrect estimate can lead to either over or under payment of entitlements. Families can avoid this risk by opting to receive their payments at the end of the year, however this undermines the intent of WfF which is to provide support when it is needed.
Changes proposed as part of the social policy Business Transformation project aim to remove this uncertainty by replacing the income estimate and instead calculating WfF entitlements based on recent, actual income. The amount of child support a person pays or receives will increase or lower (respectively) their income for Working for Families which may then lower or increase (respectively) their WfF entitlements. Efficiency The shared delivery model with MSD has advantages in that it allows beneficiaries to deal only with MSD with regards to their entitlements, but also disadvantages in that it necessitates information shares between the departments as well as complexity for families coming off or going on benefit. The current WfF system generates a high of low value contacts from families trying to estimate their income and dealing with the consequences of incorrect estimates. In 2015–16, 99.3 percent of WfF tax credit payments were made on the first regular payment date following an application. Durability and resilience WfF rates and eligibility rules are contained within the Income Tax Act 2007. The ability the system has to respond to changes in the environment is limited by the legislative process. To date this has not proved to be an impediment as generally information technology system changes require a longer lead in than the normal bill processes allows. Both Inland Revenue's and MSD's transformation programmes aim to provide a more responsive operating systems that can be quickly updated which will allow Government to react faster to environmental changes. Fairness and accountability Having the WfF rules in legislation provides a high level of transparency as all of the criteria and entitlement rates are publicly available. However, one consequence of having the rules in legislation is that they do not always cater to unusual or exceptional circumstances, which can mean in rare cases the law, as written, does not achieve the desired policy outcome. Changes proposed as part of the social policy Business Transformation project aim to introduce some flexibility by allowing the Commissioner limited discretion in how to the law when dealing with unusual or exceptional circumstances. The Generic Tax Policy Process ensures that any changes to the are subject, where possible, to robust public consultation prior to the introduction of any legislative amendment. Child support
Feasibility and black hole expenditure (New) Reviewing the rules on deductions for the costs related to undertaking feasibility studies and other possible black hole expenditures. Income tax GST on imported low value goods (New) Working with the New Zealand Customs Service to support the development of a regime to collect GST on low value imported goods. Consumption tax Employee share schemes – deferral regime for start-up companies (New) Design of a deferral regime, whereby start-up companies may defer the payment of tax on employee share schemes to a future point in time when the valuation and liquidity problems are not as pronounced. Income tax International tax and base erosion and profit shifting (BEPS) Project Description Regulatory system Hybrid instruments and entities Consideration of foreign hybrid instruments and entities in the context of BEPS. Income tax Double tax agreement (DTA) work programme New Zealand is seeking to establish new and updated double tax agreements with a number of countries, including Norway, China, Korea, Slovak Republic, Portugal and Fiji. Income tax Automatic exchange of information Domestic implementation of a new global standard on the automatic exchange of financial bank account information with treaty partners. Information sharing Interest limitation Consideration of New Zealand’s interest limitation rules in light of OECD recommendations. Part of the BEPS Action Plan. Income tax Multilateral instrument As part of the BEPS work, we have signed a multilateral instrument that simultaneously amends the double tax agreements of participating countries. The amendments to DTAs will address certain aspects of the BEPS project that have a treaty dimension, for example: treaty shopping and permanent establishment avoidance. Income tax Foreign disclosures Policy recommendations arising from the Government Inquiry into foreign trust disclosure requirements. Information sharing Inbound investment framework An officials’ paper outlining New Zealand’s approach to taxing foreign investment income has been prepared. It has been used as the basis for targeted consultation with private sector representatives, and has also been published on the tax policy website to facilitate a wide understanding of the trade-offs the Government faces in responding to BEPS. Income tax