Part 5: Achieving the programme's objectives

Inland Revenue Department: Effectiveness of the Industry Partnership programme.

In this Part, we outline our assessment of the extent to which the programme achieved its high-level objectives.

Programme objectives

In the main, IRD’s programme high-level objectives were achieved. The exception was directing audit resources toward the highest risk cases within selected industries, which was only partly achieved. IRD could have given greater attention to bringing into the tax system those high-risk people and organisations not declaring cash incomes. This might have led to the collection of more tax revenue.

The high-level objectives set by IRD for the programme did not have definitive targets. A positive trend in the measure/s for a given objective could therefore be assessed as achieving the objective.

At the project initiation stage, IRD identified key indicators and measures, but not targets, for each high-level objective. It would have been useful for IRD to have used ongoing targets in the programme. IRD told us that at the beginning of the programme it deliberately did not set targets because there would be “no science attached” to them, given the lack of programme history.

In our view, as the programme evolved during its five-year life, IRD needed to set measurable targets for assessing the achievement of specific high-level objectives for the programme. This would have enabled an assessment of the programme’s success and informed consideration of the structural and resource options for applying the programme’s approach throughout the organisation. However, we note that IRD did set targets for the various operational activities carried out as part of the programme.

Voluntary compliance levels within selected industries have increased during the life of the programme. However, it is not possible to definitively attribute these changes to the programme. Our assessment is that this high-level objective has been achieved, within the constraints of the information available.

The programme has increased IRD’s presence in the community. It has also improved the community’s perception of IRD as a professional organisation. Both of these high-level objectives have been achieved.

The programme has directed audit resources toward the highest risk cases within selected industries that were identified largely from IRD’s existing information on taxpayers. For this reason, it may not have effectively targeted the highest risk cases – those outside the tax system.

IRD has noted that the programme has had limited success in identifying people outside the tax system and has not produced the compliance opportunities that IRD envisaged. We were also told that some industries were targeted on the basis of “quick wins”, something that is not necessarily related to the highest risk.

Given both our own and IRD’s assessment, we have concluded that the high-level objective to direct audit resources toward the highest risk cases within selected industries has been only partly achieved.

As noted earlier in this report, the CCA role within the Customer Insight Group is meant to find high-risk cases outside the tax system. IRD is giving more attention to this issue, and to the hidden economy as a whole, than it did during the programme.

We were told that IRD’s Risk and Intelligence section focuses on people outside the tax system and should enable IRD to better address the highest risk cases.

Tax collection

Given that the programme did not fully target the highest risk cases within selected industries, it is likely that the programme did not increase the amount of tax revenue collected as was theoretically possible. However, because the size of the hidden economy is not known, it is not possible to identify how much more tax might have been collected.

Given some uncertainties about both the size of the hidden economy and the interventions that might work to address issues within it, the learning approach taken by IRD was generally logical and defensible. The approach was also supported by monitoring and evaluation.

Overall achievement

Overall, the programme had some positive benefits for IRD and taxpayers, and has helped inform attention being given to the hidden economy within IRD’s new Customer Insight Group.

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