Part 2: Inland Revenue's approach to communicating with taxpayers

Inland Revenue Department: Making it easy to comply.

2.1
In this Part, we describe how Inland Revenue communicates with taxpayers and how it considers the costs of interactions with taxpayers. We discuss:

the scale of Inland Revenue's communications with taxpayers;
Inland Revenue's communication channel strategy;
understanding the effectiveness of communication with taxpayers; and
costs of communicating with taxpayers.

2.2
We expected Inland Revenue to take a co-ordinated approach to communicating with taxpayers, providing them with the information they need, when they need it. We also expected Inland Revenue to select appropriate and cost-effective communication channels and to monitor its overall performance.

Summary

2.3
Inland Revenue has noted that it can improve its current approach to selecting the right communication channels. Inland Revenue plans to adopt a new communication channel strategy. In our view, the strategy that Inland Revenue is developing appears sensible. However, the challenge for Inland Revenue will be to successfully implement this strategy.

2.4
Inland Revenue currently collects information about the effectiveness of its contact centre and the number of interactions supported by its contact centre. Inland Revenue also collects information about the number of interactions at its website, but it does not collect information about the effectiveness of the website interactions. To successfully implement its new communication channel strategy, Inland Revenue needs to better understand how effective its other important communication channels, such as its website and publications, are for taxpayers.

2.5
Inland Revenue has many interactions with taxpayers each year through a wide range of communication channels. It has begun to collect more detailed information about the cost of each interaction. Inland Revenue needs to understand these costs so that it can consider the costs of communicating with taxpayers against the effectiveness of the communication.

Scale of communications with taxpayers

Inland Revenue has millions of interactions with taxpayers each year through a range of different communication channels.

2.6
In 2009/10, Inland Revenue had more than 24 million interactions with taxpayers through correspondence, telephone calls, face-to-face contact, and self-help systems.

2.7
Figure 3 shows three different channels that Inland Revenue uses to contact taxpayers and the number of interactions for each channel from 2006/07 to 2009/10. It shows that more taxpayers have contacted Inland Revenue through correspondence and self-help systems during the last four years. Inland Revenue has changed the way it measures telephone calls so that information collected before 2008/09 is not comparable with current measures. Correspondence and enquiries though self-help systems have both more than doubled during the past four years. Inland Revenue notes that automated Kiwisaver statements account for most of the increase in correspondence.

Figure 3
Number of interactions with taxpayers through three different communication channels

Source: Inland Revenue's Annual Report 2007 and Annual Report 2010.

2.8
Each interaction a taxpayer has with Inland Revenue has a direct cost associated with it. These costs are discussed later in this Part. Interactions also have indirect costs related to the effect the interaction can have on compliance.

2.9
In our view, good communication provides the taxpayer with information they need and can understand through the most cost-effective communication channel available. We expected Inland Revenue to keep track of the costs of its interactions and have a strategy to manage interactions with taxpayers. The rest of this Part discusses our findings on how Inland Revenue takes a co-ordinated approach to interacting with taxpayers to provide them with the information they need when they need it, using effective and efficient communication channels.

Inland Revenue's communication channel strategy

Inland Revenue has prepared a sensible communication channel strategy, but the challenge will be to successfully implement this strategy and to find the correct balance between effectiveness and efficiency. Inland Revenue needs to balance taxpayers' preferences against the need to move towards more efficient communication channels.

2.10
Inland Revenue communicates with taxpayers using a wide range of communication channels. These include online, printed publications, correspondence, advertising, telephone calls, and face-to-face contact. When a taxpayer initiates contact with Inland Revenue, they choose which communication channel they prefer.

2.11
In an internal document dated April 2009, Inland Revenue describes its current communication channel model as:

… based on the high-cost, paper-based environment originating from a legislative era when the internet and mobile telephone communications did not exist. Channels are fragmented, channel choice is left up to the customer and experiences are inconsistent and complex.

2.12
The document goes on to discuss how Inland Revenue is currently interacting with taxpayers and how it wants to interact with taxpayers in the future.

2.13
Inland Revenue's view of how it wants to interact with taxpayers is based on the overall goal of encouraging taxpayers to use "the online channel where they can and other channels only when they must". Overall, Inland Revenue is planning to reduce paper-based interactions and telephone calls, and encourage taxpayers to use online services instead.

2.14
Inland Revenue tells us that it is first focusing on key projects that will serve as a foundation for the rest of the communications channel strategy. At this stage, those key projects are developing important technologies that will support the new online services that Inland Revenue plans to encourage taxpayers to use.

2.15
Inland Revenue's new communication channel strategy is consistent with those of overseas revenue collection agencies. A report from the Organisation for Economic Co-operation and Development (OECD) noted that:

Relatively few revenue bodies offer in 2009 the full range of functionality defined as representing a comprehensive suite of on-line services for taxpayers – as a result, taxpayers must resort to other more costly channels for some of the services they require.³

2.16
In our view, the strategy that Inland Revenue has prepared appears sensible. The challenge will be to successfully implement this strategy and to find the correct balance between effectiveness and efficiency. Inland Revenue needs to balance customer needs and preferences against its desire to move towards more efficient communication channels. By achieving the right balance, Inland Revenue will communicate as efficiently with taxpayers as it can while also ensuring that its communications are effective and support the payment of tax.

Understanding the effectiveness of communication with taxpayers

Inland Revenue currently collects information about the effectiveness of its contact centre. It needs to better understand how effective its other key communication channels, such as its website and publications, are for taxpayers.

2.17
In its Annual Report 2010, Inland Revenue reports on the outputs of service delivery agreed with the Government. Internal management reporting focuses on how well Inland Revenue is meeting its output of service delivery. Inland Revenue's performance against all standards is updated internally through monthly management reports.

2.18
The information that Inland Revenue reports on in its annual report that is relevant to supporting voluntary compliance includes:

detailed information on the number and types of interactions with taxpayers, such as website visits, telephone calls, payments processed, and returns processed;
information about the average time a taxpayer has to wait when calling Inland Revenue;
the volume of correspondence by the type of correspondence;
customer satisfaction information for telephone calls, correspondence, and over-the-counter interactions;
information on the number of complaints received; and
the accuracy of the information provided to taxpayers.

2.19
Figure 4 shows how Inland Revenue has been performing during the past three years on some selected measures that it uses to monitor voluntary compliance.

Figure 4
Examples of output of service delivery for supporting voluntary compliance

2009/10 performance standard	2007/08	2008/09	2009/10
88% of customers will be given an answer that is correct, complete, and timely.	91.0%	87.8%	88.6%
85% (2007/08 and 2008/09: 80%) of customers who have contacted Inland Revenue are satisfied with the quality of service.	79.6%	81.9%	87.0%*
80% (2007/08 and 2008/09: 85%) of all initial phone calls are fully resolved at the time.	77.5%	76.9	75.8%

* Results for customer satisfaction for 2009/10 are not comparable with earlier years because of changes to how satisfaction is measured.

Source: Inland Revenue.

2.20
For accuracy of information and satisfaction with service, Inland Revenue has generally met its targets in the past three years. For resolving initial telephone calls, Inland Revenue's performance has not met its targets and has declined slightly during the past three years. Inland Revenue's target for resolving initial telephone calls was reduced from 85% to 80% in 2010. Inland Revenue states that it has not been able to reach its target on resolving initial telephone calls because of the complexity of the services that it offers and the number of calls that it receives.

2.21
Inland Revenue has begun to collect information, which it will report in its annual report for 2010/11, about the ease of accessing and understanding information provided over the telephone. Although we regard this as useful information, it examines only one of Inland Revenue's communication channels.

2.22
Although Inland Revenue's current performance monitoring covers several aspects, it does not allow for an assessment of how Inland Revenue is implementing its strategy of making it easy to comply. Inland Revenue currently lacks information about how helpful and useful taxpayers find its website and the publications that Inland Revenue provides for taxpayers. The information that Inland Revenue regularly collects for each of these communication channels is about the number of interactions, not the usefulness of those interactions.

2.23
We expected Inland Revenue to have more testing systems for ongoing assessment of the strategy of making it easy to comply. It is particularly important that Inland Revenue understands taxpayers' perceptions about the usefulness of interactions through its major communication channels. The new communication channel strategy proposes to increase the use of channels where monitoring is currently based on volume of interactions as opposed to the effectiveness of those interactions.

2.24
Inland Revenue tests some of the materials that it produces for taxpayers for development purposes. Inland Revenue will sometimes test a new item that it is developing on taxpayers, but this testing is not required and does not always happen.

2.25
In our view, Inland Revenue needs to better understand the effectiveness of all of its major communication channels. Inland Revenue will not achieve value for money if it creates new tools that are not effective for taxpayers. Inland Revenue's approach should allow it to determine whether taxpayers find its communication channels easy to use and helpful.

Recommendation 1
We recommend that the Inland Revenue Department monitor how effective and useful its website and publications are for taxpayers.

Costs of communicating with taxpayers

Inland Revenue is identifying and reporting on the costs of the different communication channels that it uses and is developing a way to measure the cost of delivering online services.

2.26
There is a cost associated with each interaction that a taxpayer has with Inland Revenue. These costs vary depending on the communication channel that is used and the complexity of the interaction.

2.27
Until 2010/11, Inland Revenue did not collect information about the actual costs of different communication channels. From July 2010, Inland Revenue began to collect information about the cost of some of its communication channels. Figure 5 shows a summary of these costs from July 2010 to April 2011.

Figure 5
Cost of communication channels from July 2010 to April 2011

Channel	Number of interactions	Total direct cost $	Cost per interaction $
Telephone	3,077,767	94,698,724	30.77
Correspondence*	1,062,780	44,108,116	41.50
Over the counter	180,116	8,604,424	47.77
Total	4,320,663	147,411,264	34.12

* This figure does not include automatically generated correspondence.

Source: Inland Revenue.

2.28
Inland Revenue is not currently able to estimate the cost of delivering online services, but it has attempted to do so in the past. Inland Revenue is preparing a methodology for calculating the cost of delivering online services. It plans to collect information from July 2011, so that it can report on these costs for 2011/12.

2.29
We acknowledge that obtaining a reliable understanding of the cost of delivering online services will be difficult. This is because online services range from the fairly straightforward, such as a document that a taxpayer can download, to systems that allow a taxpayer to file a tax return online. There will be large differences in the cost of these services. However, it is very important for Inland Revenue to better understand these costs.

2.30
An important part of Inland Revenue's communication channel strategy is to develop automated services allowing taxpayers to do transactions on their own that currently require help from Inland Revenue staff. Inland Revenue expects that moving to a self-service model will reduce the cost of providing support to taxpayers.

2.31
Automated services can be expensive to develop and maintain. Although Inland Revenue should realise savings by providing less direct support to customers, it will incur new costs in developing and delivering automated services. There is also a risk that customers continue to use old communication channels after automated services are introduced. Inland Revenue would then incur the expense of developing and delivering new automated services while not realising the expected gains because some taxpayers continue using the old services.

2.32
Collecting information on the costs of the different communication channels will allow Inland Revenue to make informed decisions about how it communicates with taxpayers. It will also allow Inland Revenue to better balance taxpayer preferences and the effectiveness of communication channels against the cost of each channel. Inland Revenue and Parliament will also be able to monitor the efficiency gains that Inland Revenue expects to realise by encouraging taxpayers to use new communication channels.

3: Organisation for Economic Co-operation and Development (2010), Survey of Trends and Developments in the Use of Electronic Services for Taxpayer Service Delivery, page 5.

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