Auditor-General's overview
The tax system is most effective and efficient when taxpayers voluntarily pay their tax on time and in full. The Inland Revenue Department (Inland Revenue) has adopted a strategy to support voluntary compliance by making it easy for taxpayers to comply with their tax obligations.
Making complex tax law easy for taxpayers to comply with is a challenging and important goal. A taxpayer who can easily understand their tax obligations is more likely to pay their tax than a taxpayer who does not understand. When a taxpayer does not pay tax, Inland Revenue must enforce compliance, which is less efficient and adds to the cost of collecting tax.
In my view, Inland Revenue can make it easier for taxpayers who need to file a tax return for the first time to understand their tax obligations and pay their tax. Our performance audit identified some obstacles a taxpayer faces when they are trying to understand how to file a tax return for the first time. None of these obstacles should stop a taxpayer from paying their tax, but removing these obstacles would make it easier for taxpayers to do so.
By making it easier for taxpayers to comply with their obligations, Inland Revenue could reduce the costs for taxpayers to comply, collect more revenue that is legitimately owed to the Crown, and spend less on collecting tax debt.
Inland Revenue needs to better understand how effectively its different communication channels make it easy for taxpayers to comply with their tax obligations. Inland Revenue currently collects information about how useful interactions with its contact centre are for taxpayers. However, it needs to better understand how useful some of its other main communication channels, such as its website and publications, are for taxpayers.
Inland Revenue can improve the information it provides to make it easier for taxpayers to comply. I would like to see Inland Revenue test the usability of the materials it creates with taxpayers and place more emphasis on understanding the usefulness of its materials.
Inland Revenue is aware that it can improve how it provides information to taxpayers and has prepared a communication channel strategy to do this. This strategy appears sensible and is similar to the approach taken by overseas revenue collection agencies.
I thank the staff of Inland Revenue for providing my Office with assistance and co-operation during this audit.
Lyn Provost
Controller and Auditor-General
14 June 2011