Foreword

The Inland Revenue Department (the IRD) collects most of the money that the Government requires to carry out its programmes and implement its policies. It is in the interests of New Zealanders collectively that the level of compliance with tax laws is as high as possible, i.e. that each year all taxpayers pay the correct amount of tax that is due.

The tax system relies on taxpayers making accurate self-assessments of the tax they owe, and the IRD carries out a range of activities to encourage taxpayers to comply with their tax obligations. These range from services such as providing education to taxpayers about their obligations to make it easy for them to comply, to enforcement action such as prosecuting those who do not.

Taxpayers need to know that there are efficient systems in place to ensure that all people pay their appropriate share of tax. An important component of promoting compliance is the use of taxpayer audits. Each year the IRD audits thousands of taxpayers to detect non-compliance with tax laws, and to deter potential non-compliance in the future. Taxpayer audits are a major part of the IRD’s work and involve 881 of its 4800 staff.

I am pleased to note that the IRD has used this audit as an opportunity to accelerate important initiatives and introduce a new governance arrangement for business activities including taxpayer audit. The IRD has also volunteered to keep me in touch with the changes on a regular basis. I plan a follow-up audit in two to three years’ time to examine what progress has been made.

I thank the Commissioner of Inland Revenue for the assistance provided by his staff to my auditors. I also thank the many tax practitioners around the country for the time they took to meet us and for their contribution to this report.

K B Brady
Controller and Auditor-General

28 July 2003