The proposed changes to the administration of the tax system affect nearly all taxpayers. This consultation forum focuses on changes that will affect individuals, businesses and employers, the not-for-profit sector, and software developers.

Key proposals for improving the tax administration are to:

• reduce the use of paper and increase the use of online services and technology;

• reform the PAYE and personal tax summary process, including the possible option of making PAYE a final tax for many taxpayers; and

• introduce a new framework for Inland Revenue to share information with other government agencies, including consideration of appropriate safeguards of privacy.

The details of the proposals for the identified groups are set out below.

Individuals

• Self-management by individuals of most of their tax and social policy affairs through their own secure area in Inland Revenue’s website, much like internet banking. Individuals’ customer service experience would be faster and more certain.
• Use of better technology by employers to reduce errors in the PAYE system. The technology would be supported by Inland Revenue.
• A possible new approach to the taxation of individuals under which, for some, PAYE would be treated as a final tax. This approach would not apply to groups of taxpayers when the PAYE rules may give inaccurate outcomes. Taxpayers who receive additional income for example, from rents, will still square-up their non-wage and salary income at year–end.
• Discussion around Inland Revenue being more open with tax information to improve the efficiency across government by reducing the need for individuals to provide the same information multiple times. Privacy concerns will be an important consideration for the Government.
   

Businesses, employers and the not for profit sector

• Software that takes care of routine processes. For example, PAYE compliance tasks such as the need to file an employer monthly schedule separately could be managed by software that automatically communicates with Inland Revenue. The software would have an option of providing information to Inland Revenue every pay-day.

• Inland Revenue would help employers get PAYE information right. Inland Revenue would do this by providing information about employees’ PAYE obligations directly to a business’s payroll software, after appropriate validations.

• A move by businesses, employers and the not-for-profit sector to providing information electronically rather than by paper. The Government is raising for discussion whether mandating the use of electronic communication is acceptable and, if so, when.

• Businesses and not-for-profit organisations can expect better service from Inland Revenue as resources are freed up from checking errors and processing paper as a consequence of the proposals set out.

• Not for profit entities often have high staff turnover, so having software which manages more of the routine processes and supports better use of software will be of particular value.

Software developers

• Inland Revenue would support software developers so they can develop and improve products for their clients. Inland Revenue is proposing strategic partnerships with these groups starting with payroll businesses.

• A key element to the proposals is that software developers would develop software that will be able to deal with routine tax compliance tasks, such as providing PAYE information directly into Inland Revenue systems without the need to access separate Inland Revenue systems.

• The Government is asking for views from software developers about how the strategic partnership to develop this software might work and what can be done to encourage employers to move from a paper to an electronic environment.

Diagrams

The diagrams below show the current and proposed state of the tax system. The diagrams show the key participants and the key information flows in the system.

Current state of the tax system

Potential future state of the tax system

More information

This consultation forum is a summary of the proposals to improve the administration of the tax system for individuals, businesses and employers, the not-for-profit sector, and software developers.

You can also download a discussion document which works through these issues in more detail here.