Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Annual
Report
2015
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Presented to the House of Representatives pursuant to the Public Finance Act 1989 and the Tax Administration Act 1994.
Contents
enormously proud of how For the first time in five years, Inland
with the revenue system in future. And
Revenues overdue debt total has reduced.
much Inland Revenue has as we prepare for transformation, were
Weve done this by contacting businesses
making it easier every day for businesses
achieved for the people of and individuals, through continuous
and individuals upfront to prevent them
getting into debt, following up fast with
New Zealand. This years improvement and innovation.
effective arrangements to manage any
Annual Report reflects many More people are doing a lot more online. debts, and recognising that some debt
During the year we improved our website
of the improvements youll and myIR online services, and made it
costs more than its worth to collect.
notice next time you look easier to register and find information.
The vast majority of student loan debt is
owed by borrowers now living overseas,
for information online, file Since August customers have been able to
and much child support debt is owed by
activate their new myIR account instantly
a return or claim a refund. via text. Customers are embracing new
liable parents living in Australia. Weve
used innovative campaigns to successfully
Were making the business of digital opportunities last year 67% of
reach these customers and recover debt.
tax and entitlements simpler, returns and almost 83% of payments
Our student loan campaign was a gold-
were done online. Our mobile app that
more open and more certain lets small businesses do GST on the go,
medal winner in communications awards.
for customers and businesses developed through crowd-sourcing and We also reduced overdue tax returns
research, is hugely popular. by 21.5% last year, finalising 1.45 million
across New Zealand. overdue returns and reducing the number
Going digital gives customers increased
outstanding to the lowest level in five years.
certainty. But if they need to call us were
answering more calls and answering We also take further action to ensure
them faster: 75% of our 3.24 million everyone pays the tax they should.
calls received last year were answered During the year we tackled the hidden
in less than two minutes. Voice ID, with economy, property tax compliance and
1.5 million customers registered, and aggressive tax planning, with an excellent
automatic call-back makes the process rate of return on each. We also had some
even smoother. outstanding wins in the courts.
These changes and more contribute to
Reforming child support
Better Public Services, making it simpler
and more seamless for New Zealanders A significant project during the year
to deal with Government. Were working was changing the child support system
with many other agencies on a range to better reflect how families live since
of projects from sharing information child support was introduced in 1992.
that supports customers to joint service After earlier public consultation, the first
delivery. Businesses are noticing the changes took effect on 1 April 2015, with
difference: a recent survey reported a 23% the second stage to come in April 2016.
reduction in the effort of dealing with In preparation we contacted thousands of
Inland Revenue. parents who pay or receive child support
to make sure they understood the changes
Getting it right and were well-prepared for their impacts.
Our new Compliance Model helps us We used social media and texts as well as
understand customers better and tailor more traditional channels. 68,000 visitors
our approaches to respond to different used our online calculator to work out
customer behaviours and needs. We want how changes could affect them.
Conclusion
Its a privilege to be Commissioner of Inland Revenue. Alongside great customer service
delivered every day this organisation provides advice to Government on tax and social
policy; and contributes to solving international tax issues.
This year we helped make New Zealand an even better place to live and work in many
ways - including collecting $59.7 billion of tax revenue that helps fund services to benefit
all New Zealanders.
Im proud of our people who are committed to making a difference in peoples lives and
adding value every day. As we look forward to next years challenges I am confident
Inland Revenue has the people, skills and innovation to meet the future.
Naomi Ferguson
Commissioner of Inland Revenue
WE COLLECTED WE TRANSFERRED
$59.7
BILLION OF TAX REVENUE FOR
$4.8
BILLION OF KIWISAVER
THE GOVERNMENT CONTRIBUTIONS TO PROVIDERS
WE PAID
KIWISAVER MEMBERSHIP
$3.4
REACHED
five years
16 (67,000)
% THAT WE HAVE BEEN ABLE TO
REDUCE THE TOTAL AMOUNT OF
OVERDUE DEBT
CONTINUED INCREASE IN
CUSTOMERS USE OF DIGITAL
SERVICES. WE RECEIVED
$ 82.5 %
OF PAYMENTS ELECTRONICALLY
67.4 %
COMPARED TO 74.2% LAST YEAR OF RETURNS ELECTRONICALLY,
UP FROM 59.8% LAST YEAR
91
ALL ITS MILESTONES AND
WAS UNDER BUDGET
%
CHILD SUPPORT REFORMS PHASE OF OUR SERVICE PERFORMANCE
ONE COMPLETED AND IMPLEMENTED TARGETS COMPARED TO 85%
SUCCESSFULLY LAST YEAR
From left to right: Mike Cunnington, Deputy Commissioner Arlene White, Deputy Commissioner Service Delivery
Information, Intelligence & Communications
Greg James, Deputy Commissioner Change Myles Ward, Chief Technology Officer
Naomi Ferguson, Commissioner
Giles Southwell, Chief Financial Officer Struan Little, Deputy Commissioner Policy & Strategy
Martin Smith, Chief Tax Counsel
Mary Craig, Deputy Commissioner Corporate
Integrity & Assurance Jeanie Truell, Chief People Officer
KiwiSaverwe administer the Paid parental leavewe make Our operating budget
scheme by collecting contributions payments, for the Ministry Our operating expenditure for the
and transferring them to scheme of Business, Innovation and 201415 year was $704.2 million, an
providers for investment. At Employment, to parents who increase of $3.7 million over the prior
30 June 2015 there were 2.5 million take leave from their job or year. Expenditure for 201516 is
people enrolled in KiwiSaver. We business to care for a baby. We forecast to be $764.9 million, an increase
distributed $4.8 billion to scheme made $180 million in payments of $60.7 million. Most of the forecast
providers. to 27,500 parents. increase relates to expenditure on our
Business Transformation programme.
Student loanswe jointly
administer this programme with 1
2015 figures not available
the Ministries of Education and
Social Development (StudyLink).
We had 728,000 student loan
borrowers and collected $1.1 billion
in repayments.
Digital services
We are enabling our customers to In January 2015, we launched our new
do more online. It is part of our free mobile application myIR on Apple
products. This enables small to medium
strategy to save our customers and
enterprises to manage their GST through
Inland Revenue time and money.
their smartphones.
Completing their tax and social
We recognise that our website is the first
policy obligations online also helps
place most people go when they want
customers get it right the first Our work to make tax
to find out information so we work hard
time and means we do not have to make sure it is the best it can be. We easier to understand on
to contact customers to check the also publish instructional videos on our our website was recognised
information provided is accurate. YouTube channel InlandRevenueNZ. We again. In December,
Over the past year the number of are continually improving our website
ird.govt.nz won the ESET
people who have started to file and YouTube information to make sure
customers are able to find the information NetGuide best Government
online and use our online tools
has increased. The number of
they need. One of the improvements website award for the eighth
we made was to add transcripts of our
returns we received electronically time in nine years.
introductory videos written in Korean
increased by 8.3 percentage points and traditional and simplified Chinese
since last year compared to a 4.4 to reflect the changing needs of our
percentage point increase the customers. These are in addition to
previous year. information in English, Mori and New
Zealand Sign Language already available.
Customers are able to register for a myIR
Another example of improvements we
account to manage their own tax and
have made to our website is the employer
social policy affairs. To make things easier
superannuation contribution tax (ESCT)
for our customers, we have updated myIR
tool. Customers told us that ESCT was
and introduced more online documents
hard to understand so we created an
to provide access to statements, notices
educational tool in July 2014 to help
and letters electronically. We made
employers. The tool explained what ESCT
eDocuments available to customers in
was and how to calculate, file and pay ESCT.
April 2015. This fits with the objectives of
This has been used over 163,000 times.
the Governments Better Public Services
Result 9 and 10 goals covered on page 27.
Customers expect to be able to interact
with us using all their digital devices.
Phone calls
COVERAGE 201415 ACTUAL OUR TARGET
Minimum percentage of attempted
calls that we answer
96.5% 75%
TIME
At the end of June 2015,
Minimum percentage of telephone
calls answered within two minutes
75% 75% 1.5 million people were
We aim to make sure our customers can get the answers to all their questions online.
registered for Voice ID.
However, if customers cannot find the answer they need online then most will call us. Inland Revenue has one of
When people do call, we are answering more phone calls and answering them faster. the worlds highest rates
We answered 3.24 million calls this year, which was 96.5% of calls received. Overall the of enrolment for voice
number of calls we answered was similar to last year but our contact centres received 4%
recognition services.
(141,000) fewer calls this year than last year.
Reducing the time it takes for us to answer customers telephone calls improves their
experience and satisfaction. This is why we aim to answer calls as quickly as possible. We
answered 75% of our customers calls within two minutes.
We managed our calls more effectively by directing calls to staff with the best skills to help
and by offering our customers call-back options including the opportunity to book a time
for us to call them back when they are free. We have also reduced the number of phone
calls that are related to follow-up contact by improving how quickly we get back to people.
We introduced Voice ID in November 2011 as a way to recognise people and remove the
need for us to ask questions to confirm that we are talking to the right people. This saves
the customer time and enables us to answer calls faster. People register with Voice ID
once then use the system each time they call.
Tax agents
Some of our customers choose not to manage their own taxes, but instead use tax
agents. Tax agents are a key customer group for us. A tax agent is a person who prepares
the returns of income required to be filed for 10 or more taxpayers.
We have been working with tax agents to continue to make things easier.
An example of the changes we made to help tax agents was creating new correspondence
guidelines for any requests they send to us. These explain what information needs to be
provided so the request can be considered or the return processed as quickly as possible.
We also updated the Tips for Faster Processing page on the tax agent section of our
website to improve accuracy and reduce common errors when they are filing returns.
Tax agents also told us that linking Inland Revenue client information with their systems
was an issue. In March 2015 we made changes to myIR where tax agents link and delink
clients and they can now do this easily for new customers or if a customer chooses to no
longer use a tax agent.
Tax agents overall satisfaction with us showed statistically significant improvement from 89%
satisfied and 69% very satisfied in 201314 to 92% satisfied and 78% very satisfied this year.
$
electronically. This also makes it easier for us to process payments faster.
To help our customers know all the ways they can pay electronically, we developed a
45-second video on the Make a payment page of our website. We have also made the
payment page responsive and easy to use on mobile devices. Around 20% of customers
visit our payment page using a mobile device.
We removed the option for cheque payments at Westpac. Now that Westpac only receives cash We had 82.5% of payments
or EFTPOS payments, we have seen a large reduction in exceptions. Exceptions are payments
that cannot be processed or that are missing information like IRD numbers. In December 2014,
made electronically
we had 21 payments which could not be processed. These exceptions were worth $10,000. compared to 74.2% in
This compares with 5,400 exceptions worth $56 million in December 2013. During January and 201314 and 70% in 201213.
February 2015 we had one exception each month and by March we had no exceptions.
For customers who want to pay over the counter at Westpac, we introduced barcodes on
payment slips in June 2015. The barcode aims to reduce time and errors for these transactions.
Improving compliance
I LIT Y
AB
AP
A key aspect of our core business is helping to maximise voluntary C
MO
TI VATI O N
compliance. We assist customers who are willing to meet their
compliance obligations but are unaware or uncertain about how to
OP
CUSTOMER
do so. Influencing voluntary compliance, targeting inadvertent non-
PO
RT
compliance by providing information, assistance and tools, and detecting UNI
TY
and deterring deliberate non-compliance are part of our core activities.
If our investigation detects a discrepancy, a difference between the tax position filed by a
taxpayer and the position determined by our investigations, we issue a new assessment and
New Zealand has a voluntary
may charge penalties and interest. This year we identified discrepancies of $1.23 billion. The
overall return on investment for our investigation activity was $7.52:$1 (target $7.00:$1). compliance approach to
tax. This is an environment
dependent on an open,
Aggressive tax planning honest and transparent tax
A small number of people try to avoid paying the tax they should, reduce the amount system where there are high
they should be paying or increase their entitlement to social benefits. They use
inappropriate or unlawful tax structures and this is called aggressive tax planning. We
levels of mutual trust and
match information from different sources to identify potential aggressive tax planning understanding between
structures and schemes. customers and the revenue
Our work to counter aggressive tax planning contributed $336.9 million toward the total agency.
discrepancies result. Of this, $191.1 million came from examining complex finance and trust
losses. This produced a return on investment of $34.10:$1 (target $11.60:$1). We resolved the
last optional convertible notes cases after the settlement with Alesco New Zealand in 2014.
This contributed $64.3 million to this years discrepancies. This year we have worked on cases
OUR NEW COMPLIANCE MODEL > A thinking tool to help us understand customers better so we can
work pro-actively and tailor approaches to make compliance easier.
EDUCATE
MO
CUSTOMER
PO
ICE
RT
V
UNI
SER
compliance
CO our customers.
LA L
BO
E R AT
LYS E
ANA
Hidden economy
People operate in the hidden economy by intentionally not declaring or accurately
reporting transactions. We focused on higher-risk sectors such as hospitality and
construction. We identified discrepancies of $146 million in the hidden economy. Of
this, $45 million (target $44 million) came from Budget 2010-funded work, a return on
investment of $5.21:$1 (target $5.00:$1). As a last resort we prosecute to recover funds
from taxpayers operating in the hidden economy.
In May and June 2015, we ran an advertising campaign to remind tradespeople to
declare all of their income. The campaign ran in four suburbs in Auckland and included
billboards and posters at construction sites, and advertisements online, on radio, and in
trade publications. The reaction was fast, with tax agents reporting a large number of
calls from people looking to add cash jobs to the information they had submitted to us.
Prosecutions
We completed 67 prosecutions for tax evasion or knowledge offences. This compares with
74 last year. The decrease was related to the timing of cases before the courts. At 30 June
2015, 79 such cases were pending. There were 89 cases pending at the same time last year.
2
All debt figures up to the child support section on page 21,
exclude child support debt
Child support debt is $3.3 billion, 79% ($2.6 billion) of which is penalties.
Of the total child support debt, around $827 million is owed by liable parents living in
Australia, and is mostly in the form of penalties. In accordance with our agreement with
the Australian Department of Human Services they collected $50.2 million from these
parents on our behalf. A further $778 million is owed by those living in other parts of the
world. The remaining $1,671 million debt is owed by liable parents living in New Zealand.
For child support, over the last year there were 56 cases where the lack of action by the liable
parent justified Inland Revenue to seek an arrest warrant. We have only been required to execute
one arrest warrant. All other cases were able to be resolved by simply having the possibility of a
warrant being executed. The total debt relating to the 56 cases amounted to $11.7 million.
Budget 2014 provided us with additional funding to help improve child support compliance.
We are beginning to see positive outcomes from our activities in this area, including more
debt cases being closed within 12 months of opening and a reduction in the total number of
debtors at the end of the year. Early work has included an education campaign to new child
support customers on their obligations, particularly taking into account the child support
reform changes, ensuring they understand their obligations to help them get it right from the
start. This initiative aims to progressively increase the amount of debt repaid over a five-year
period with early work resulting in an extra $1.5 million recovered from liable parents.
In line with Governments ICT Strategy, We have now completed our first year of
we are also using all-of-government running a shared financial management
services where they are available information system with DIA. As part of
and where they fit with our Business this service we have successfully provided
Transformation programme. accounts receivable, accounts payable and
bank reconciliations for both organisations.
Working with the Ministry of Business,
We have refined the system during the year
Innovation and Employment (MBIE) and
and are working with DIA on enhancing the
other participating agencies, we have
system and processes in the future.
helped to develop the Result 9 roadmap
and worked on key initiatives such as the We continue to work with the Property
New Zealand Business Number (NZBN). We Management Centre of Expertise (PMCoE)
have also delivered products and services and to join with other agencies to lease
that support Result 9s intent of improving accommodation, where it makes sense to 3
Hosted by MSD, PMCoE leads and assists agencies in
do so.3 meeting the goals set by Government for the efficient and
interaction with government for businesses effective management of the property owned or leased by 61
government agencies.
Business Transformation
We are currently managing a range High-level design of the four stages has Cabinet approval and
of tax and social policy products been completed and the detailed design
legislative changes
of stage one has begun. We anticipate
on an ageing system and business
that the detailed business case will Changes proposed in the Taxation
model. Over the years our role has (Transformation: First Phase Simplification
be completed and submitted to the
expanded from solely collecting tax Government for approval by March 2016. and Other Measures) Bill introduced on
in a paper world, to today where Once approved, implementation of stage 30 June 2015 pave the way for
we manage the collection and one will begin. We have delivered some modernising and simplifying the tax
payments of tax and a range of other visible, early improvements to our digital administration system by removing some
services like student loans, child services, including improving myIR and current legislative obstacles.
support and KiwiSaver. Adding making improvements to our website. They include:
these social policy products and This year we focused on designing the proposals to allow earlier tax refunds
services to 30 year old technology foundations for our future revenue system. on personal tax summaries that meet
has resulted in complexity. The design phase began in January 2015, the automatic refund threshold
and covers high-level design for stages one
reforming the way we are able to
Our tax administration needs to catch up to four of the programme, and detailed
communicate with our customers by
and be fit for 21st century needs. design for Stage 1: Enabling secure digital
providing modern rules to support
Technology is rapidly advancing, our services. The design and digital services
electronic communication in the same
customers lives are busier than ever and business case outlining the approach to
way as paper communications
businesses want to spend less time on design and the funding, was approved by
Cabinet on 17 November 2014. measures to allow us to share certain
compliance. New Zealand is becoming
more diverse and customers want and We have a regular programme of information with other agencies when
expect us to interact with them in a independent quality assurance reviews to it makes customers lives easier.
digital world. continually check that what we are doing is
the best way to do it. Over the year we had
Choosing design and core
Modernising our systems and processes
will also enable the Government to a Deloitte review and the Gateway Review software partners
implement policy more quickly. in September 2014, KPMG Independent We spent most of the year completing
Quality Assurance and Technical Quality very careful procurement processes to
The Business Transformation programme
Assurance completed in December 2014 select partners to help us design the
consistently met its milestones and spent
and a review from the Office of the Auditor next stage of Business Transformation
less than its budget throughout the year.
General in April 2015. All were positive and and a software provider to supply the
How we are changing support the way we are transforming and technological core of our future system.
the quality of our processes. Results of the
Our Business Transformation programme We chose Accenture and two local
reviews are available on www.ird.govt.nz/
is being delivered in four customer- providers to help us with design. External
transformation.
focused stages over eight to 10 years. quality assurance checks found the
Organisational health
Governance We have revised our leadership framework Health and Safety
and are currently redesigning our leadership
To ensure our governance system A range of activities have started to
programmes to reflect this.
continues to meet the needs of our ensure Inland Revenue is compliant and
Our people leadership strategy includes: has strategies in place that willeffectively
transforming organisation, we introduced
changes to our governance system in embedding this leadership framework transition the organisation to the new
May 2015. The governance system will renewing our development Health and Safety legislation, which comes
ensure robust and timely governance of programmes for leaders into effect 4 April 2016.
our strategy, investment and performance We are currently working to bring
encouraging leadership collaboration
activities, focusing on transformation, but our health and safety-related policies,
also ensuring we are meeting the needs further developing our leadership skill set.
processes and systems into line with the
of today. Membership across the system This work aligns with the State Services requirements of the new legislation. Our
is a mix of our Inland Revenue Executive leadership strategy and Leadership Success activities include exploring a health and
Leadership Team, senior leaders and Profile (LSP). Our leadership framework safety governance reporting structure
external members where appropriate. identifies those things from the LSP that will provide our governance group
which are important for us to focus on with regular information on health and
Preparing our people for at this time and describes some of the safety risks and mitigation and ensuring
change fundamental shifts we are looking for in people including managers and health and
our leaders as we progress through our safety committees receive education and
Changing and streamlining the way we
transformation journey. increased visibility of the legislation.
deliver our services, mainly through
In line with the introduction of talent
greater use of digital and online services,
management across the state sector,
will have an impact on our people. As
Inland Revenue has implemented a talent
we move towards greater application of
management approach for senior leaders,
technology and streamlined processes,
to be extended to other leadership levels
we will make changes to our workforce.
in the future.
To prepare for this, we are designing
frameworks and systems to help reshape
Culture
our organisational capability.
We have updated our workforce strategy Inland Revenue wants productive
to help us identify what we need to do and engaged employees, and a work
to deliver our strategic intentions. This environment that features strong
has supported work on our organisations leadership, innovation, clear accountability
culture and our leadership strategy. and sound risk management.
In June 2015, we completed a baseline
Change leadership and culture survey of a sample of 600
capability employees. This survey was designed to
give us some benchmark measures around
Effective change leadership is essential to lead
our culture and will help us understand the
our people through Business Transformation.
shifts we need to make in order to get us to
We need leaders to be more agile, adaptable
our desired future culture.
and open to new ways of working.
OUR PEOPLE PROFILE AS AT JUNE 2014 OUR PEOPLE PROFILE AS AT JUNE 2015
STAFF OVERALL 64% STAFF OVERALL 36% STAFF OVERALL 64% STAFF OVERALL 36%
PEOPLE LEADERS 54% PEOPLE LEADERS 46% PEOPLE LEADERS 55% PEOPLE LEADERS 45%
MANAGERS 46% MANAGERS 54% MANAGERS 46% MANAGERS 54%
! !
NEW HIRES 743 UNPLANNED TURNOVER* NEW HIRES 737 UNPLANNED TURNOVER*
EXITS 663 ANNUALISED 8.6% EXITS 675 ANNUALISED 10%
group called Te Manu Taupua, which has continue to function during and after
a focus on areas of common interest and business disruptions. The benefit of this
concern for our Mori staff. preparation was demonstrated in an
effective organisational response to a fire at
Security incidents our Auckland contact centre. Full telephone
We are committed to keeping our people services were restored within 48 hours.
safe. We monitor and record security Privacy
incidents and continually assess our
Risk management
workplaces to ensure that we minimise Risk management is an important part of
We are committed to
risks and concerns so that our staff feel Inland Revenues governance and internal
safe. We review any process after any control environment. ensuring our customers
incident and will change a process if a We ensure Inland Revenues approach to privacy is protected. Any
threat profile is changed. risk management reflects good practice and personal information
For example, in early April we received supports risk-based decision-making across customers do provide to
a security threat. The threat was via a all levels of the organisation.
phone call and involved our Tauranga
us will be kept for as long
We are continuing to improve our practices
and Wellington offices. We informed staff to provide greater clarity to our decision-
as necessary to achieve the
of the threat and we worked quickly to making processes. purpose we collected it
ensure security was provided to mitigate
We have a mature Enterprise Risk for. If personal information
the risk and provide a safer environment
for our staff.
Management Framework that is used to becomes part of Inland
identify and manage risk as we:
Inland Revenue reviewed the Revenue records, we will
deliver our core business
recommendations that came out of the retain the information in
independent review of MSDs physical implement projects and programmes
accordance with Inland
safety environment following the tragic consider risks to achievement of our
shooting of three of their staff members strategic objectives.
Revenue policy on retention
in Ashburton in September 2014. We use the concept of risk champions
of Inland Revenue records.
We raise security awareness using a embedded within business groups to further Full details of privacy
number of communication mechanisms: improve our risk management maturity.
breaches are outlined on
proactive poster campaigns We continue to use a Three Lines of
throughout the year supported by Assurance model to enhance clarity page 156.
self-help tools readily available on the regarding risks and controls and help
intranet improve the effectiveness of the internal
mandatory on-line learning modules control environment. Our Internal Audit
plan and use of third party assurance
event triggered communication using
providers ensures that there is an
our intranet. appropriate level of independent assurance.
We fail to balance all-of- We will align our long-term planning with the Governments Better Public Services goals.
government strategies We will participate in all-of-government steering groups to understand and anticipate
effectively with the delivery of impending public sector changes.
our core business leading to
sub-optimal outcomes
We are unable to source Our four-year and 10-year plans will make a compelling case for the investment we
sufficient government funding need to implement changes.
to deliver our Business We will present rigorous, well-considered business cases for government funding that
Transformation programme set out the costs and benefits of proposed spending.
Our Investment Board will provide strong governance oversight of our Business
Transformation programme investments.
Natural hazards such as We will identify and assess potential business impacts and regularly review our
earthquakes disrupt delivery of response plans, which include business impact assessments, business continuity plans,
critical services disaster recovery plans and business continuity emergency management procedures.
We dont have enough We will develop and implement strategies to promote workforce capability,
experienced and qualified employment relations, leadership and workplace culture.
people to deliver the Business
Transformation programme and
other programmes
The expanding availability of We will ensure our security policies, procedures and standards are strong and enforced.
our information in digital form We will develop and monitor information-sharing protocols.
to others reduces our ability to
We will align our protocols with government security and privacy standards.
control that information
We will continue to review staff training and awareness.
We will continue to assess our security processes and performance.
Individuals and organisations We will keep our security incident database up to date.
represent themselves as Inland We will monitor social media and internet sites for signs of security breaches.
Revenue, affecting the integrity
We will respond rapidly to reports of misrepresentation.
of the tax system
We will develop communications strategies to alert the public to scams.
Ineffective or incomplete We will continue to work towards reaching our target operating model.
delivery of the Business Our governance boards will monitor progress of the Business Transformation
Transformation programme programme.
reduces our ability to meet
Our management will coordinate and report on progress of the Business
government revenue forecasts
Transformation programme.
Ineffective or incomplete We will continue to work towards reaching our target operating model.
delivery of the Business Our governance boards will monitor progress of the Business Transformation
Transformation programme programme.
reduces our ability to
Our management will coordinate and report on progress of the Business
implement government policy
Transformation programme.
Confidence among customers We will ensure our security policies, procedures and standards are strong.
and stakeholders in our ability We will develop and monitor information-sharing protocols.
to protect their data as a result
We will align our protocols with government security and privacy standards.
of information-sharing with
government agencies results in We will continue to review staff training and awareness.
a drop in voluntary compliance We will align our security processes with other agencies and continuously monitor
performance.
A downturn in the worlds We will continuously identify and monitor changes in overseas economic trends
economy affects New Zealands through research and forecasting.
ability to fund and deliver
government priorities
The changing customer profile We will monitor and report on the effect of changes to the customer base.
affects voluntary compliance We will use research and planning to develop tailored responses to customer base
changes.
We lose the trust and We will continue to work closely with the Ministers offices.
confidence of stakeholders The Executive Leadership Team will engage closely with key stakeholders.
by not recognising or
We will monitor and respond to changes in the integrity of the tax system.
understanding how their
expectations change We will monitor and respond to emerging trends in policy and strategy.
We will take part in forums with our key stakeholders.
Complex international We are members of the OECD and work with overseas tax administrations to identify
transactions affect our ability to changes to practices.
collect revenue We are joint advisors with the Treasury in developing policy and strategies to work on
complex international practices.
$3.5b
from 201314
$17.5m
from 201314
IND INTEREST
$29.4b
UNWIND
TAX REVENUE STUDENT LOANS
$604.2m
$59.7b OTHER REVENUE
$887.5m
CHILD SUPPORT
$197.0m
GST
$15.6b OTHER
$86.3m
OTHER CORP
$3.9b $10.9b
We also manage or share administration of several social policy entitlements and payments. The key programmes we administer are:
scheme providers
$463m child support payments collected
$265m child support entitlements distributed*
$2.4b Working for Families Tax Credits
entitlements distributed $180m paid parental leave entitlements distributed
*The balance is collected for the Government as an off-set for custodial families supported through
44 ANNUAL REPORT 2015 the benefit system.
06
While we have achieved 91% of our output measure targets for representing a 5.8% decrease from 201314.
201415, we have not been able to collect all revenue owed. Our Child support debt reached $3.3 billion by the end of 201415, a 7.5%
debt book is made up of payments which are overdue, and the increase from the previous year. Penalties make up 79.4% of this total.
penalties and interest we charge against this debt. At the end of
Student loan debt has also increased, totalling $933 million by the
201415 the size of our debt book, excluding debt from student
end of 201415. This is a 21.3% increase since the previous year.
loans and child support, was $5.2 billion. This is a good result,
Overseas-based borrowers owe 90.5% of this debt.
Size of our debt book excluding child support and student loan debt as at 30 June
6
5
DEBT $BILLION
4
3
2
1
0 Total debt value including penalties and interest
3.5
3.0
DEBT $BILLION
2.5
2.0
1.5
1.0
0.5
0.0 Total debt value including penalties
2010 2011 2012 2013 2014 2015 Penalties
1.0
DEBT $BILLION
0.8
0.6
0.4
0.2 Total debt value including interest
To deliver the services for the six appropriations effectively we need to invest in the
renewal, upgrade and replacement of assets. To support the delivery of our services, we
have an additional appropriation for capital expenditure.
See pages 89 to 92 for a full breakdown of:
departmental expenses and capital expenditure attributed to these appropriations
non-departmental appropriated expenditure
non-appropriated expenditure.
We measure and manage our performance against 53 targets within these six
appropriations. The dashboard scores indicate the number of targets we have achieved in
each output class. This reflects the relative impact of each activity on the business. A full
breakdown of our appropriation performance is outlined in part seven.
1 Policy Advice
Achieved 1 target out of 3 33%
5 Taxpayer Audit
Achieved 8 targets out of 8 100%
Operational efficiency
Our operational teams have achieved considerable savings in the form of greater
efficiencies in servicing our customers. This has created additional capacity, which has been
reinvested to help us improve performance and deliver additional change effectively, such
as the first phase of the changes to child support.
We use a number of tools to automate basic repetitive tasks that do not need any decision-
making or real input from our people. This enables our people to focus more on tasks that
require real decision-making or customer engagement, with the overall outcome being that
we can provide an improved and faster service to customers.
We continued to improve processes to ensure we deliver the value for money the
public and Government expects. The efficiencies driven by our operations management
programme in customer-facing areas enabled us to do just over 450,000 hours more work
this year. We estimate that this extra capacity is equivalent to a cost of $12.2 million. Since
the programme started in March 2011, it has produced capacity savings equivalent to $32.5
million, $4.7 million above the target. To achieve further efficiency gains we are taking an
enterprise-wide continuous improvement approach.
We have been developing our continuous improvement capability and while this is focused
on improving our performance to the customer, it is also helping to prepare our people
for the transformation of our business. We will extend our continuous improvement
programme across the organisation to a number of our support services in 201516. 2
Economy saving on postage and printing costs
This year we spent $16 million on print and postage. By giving customers access to their
details online, we aim to reduce these costs.
Because more of our customers are filing online we stopped providing prepaid envelopes In May we were ranked
for Employer Monthly Schedules (EMS) in November 2014. In 201213 the cost to send
envelopes was about $840,000. In 201415 the cost was around $200,000 and for the
as number two in
201516 year, it is expected that the annual cost will be reduced to $40,000. CIO Magazines top
100 companies and
Maintaining our computer systems and infrastructure government agencies
While we prepare to make a large investment in a new core system through our Business across New Zealand an
Transformation programme we are also investing in our existing systems where it is
sensible to do so. We still need to meet government and customer expectations for
acknowledgement of
better, smarter and more cost-effective systems and support the stability of our ICT the complex technology
environment while we transform. planning and support we
Our ICT Strategy and Roadmaps guide our activities to deliver safe and secure digital provide to collect and
services to our customers. The strategy will drive the future rationalisation, consolidation
distribute revenue and
and simplification of our ICT environment and is closely linked to our Business
Transformation objectives and the Governments overall ICT Strategy. social policy payments for
Our mainframe platform houses the core FIRST business systems, all our customers data, New Zealand.
including their return, payment, entitlement and transaction activity. In 2012 Cabinet
approved a business case for us to replace the existing platform which was approaching
end of life.
There was considerable risk attached to this move. We spent nearly a year planning and System back-ups that used
testing to get this right, which included moving the planned cut-over date from May 2014 to to take six hours are now
November 2014 in order to ensure that our peak business periods were not affected. completed in three hours.
In November 2014 we successfully transitioned to a new mainframe platform service.
With the new mainframe in place, run by Unisys New Zealand, we can accelerate our
digital growth and support our goal to make it easier and faster for customers to do
business with us.
We have since seen significant performance improvements for both our external
customers submitting their tax returns and accessing our online services and our internal
staff members accessing the system. For example system back-ups that used to take six
hours can now be completed in three hours and the time to complete the annual PTS
run reduced from 27 hours to seven hours and was able to be completed over a weekend.
This meant that intermediaries were able to process refunds much more quickly and
customers received their refund days earlier than previous years.
We continued to update and upgrade our existing systems and infrastructure to ensure
they support a high level of stability and reliability for our customers. Examples include:
upgrading the underlying ICT environment for our electronic document storage and
retrieval system
moving our legacy printing platform to XPression
upgrading the software components and replacing the underlying hardware in our
contact centres and our telephone environment.
201415 201415
201314 201314
ONLINE
95
satisfied
%
95% VOICE &
85
satisfied
%
85%
CORRESPONDENCE
Overall customer satisfaction scores have 97% of our customers recognised that Looking at 4-5 out of 5 ratings, or
remained stable in 201415, with the paying tax contributes to New Zealand customers who were very satisfied,
same results for online and voice and society. Between 200910 and 201415, there were improvements in customers
correspondence services as measured in the proportion of customers who resent perceptions for all indicators in 201415
201314. Tax agents showed a statistically paying tax dropped from 46% to 41%. compared to 201314. Increases of at least
significant change in overall satisfaction for For our customers to trust us and believe in 3 percentage points in the proportions of
voice and correspondence services, with the integrity of the tax system it is important customers who rated 4-5 out of 5 were seen
92% satisfied (up 3.4% from 201314) and they believe we do a good job in collecting for the following indicators:
78% very satisfied (up 13.0% from 201314), taxes and paying entitlements. From 201011 Confidence that Inland Revenue does a
which can be attributed to an improvement to 201213, the proportion of customers good job
in satisfaction with accessibility and who were confident that Inland Revenue did Inland Revenue can easily be accessed
perceived ease of access to our services. a good job was stable at 92%. In recent years
However, due to the weighting of results Information is treated confidentially
this has increased, reaching 94% in 201415.
based on the sample size of customer groups Inland Revenue treats people fairly
There were also increases in the proportions
surveyed, this does not result in an increase
of customers who agreed that they accessed Inland Revenue makes it easy to get
in Business and Overall satisfaction scores.
Inland Revenue easily, from 81% in 201213 it right.
Tax revenue is used by government to to 87% in 201415.
pay for services we all use. In 201415,
47%
46%
45%
44%
43%
42%
41%
40%
200910 201011 201112 201213 201314 201415 Resent paying tax
Proportions of all customers who agreed (3-5 of 5) that Inland Revenue can easily
be accessed, and that paying tax contributes to NZ society: 200910 to 201415
100%
95%
90%
85%
80%
75%
Paying tax contributes to NZ
70% Confidence IR does a good job
200910 201011 201112 201213 201314 201415 Easily access IR
Our impacts
We want our activities and interventions to improve customer
compliance behaviour. We use 14 impact indicators and four contextual
indicators, grouped under five Impact Statements, to measure our
progress. We have set targets to be achieved by 201718, which take into
account our strategic intentions (including transformation goals), our
operating environment (including government priorities), the economy,
our resources and customer expectations.
More customers
The behaviour of
register and report
non-compliant
Our accurate information
customers improves
when required
impacts
More customers are able to More customers register and More customers claim their
self-manage report accurate information correct entitlements
This year we reached our 2018 target of when required Social policy-related compliance levels
80% or more of customers find it easy The results show improvements in the remained stable. This year we achieved
to comply. We are only 2% away from accuracy of submitted returns, driven by our 2018 target of 75% or more of child
achieving our 2018 target of 85% or more lower error rates for individual income tax support assessments are collected.
of customers are aware of their obligations returns submitted electronically.
and entitlements.
More customers pay and file The behaviour of non- of total debt, and high levels of uncollectable
debt unable to be dealt with are limited by
information on time compliant customers improves
appropriations for write-off. The end of this
On-time filing and paying compliance We continue to improve our results, collecting
year sees a smaller debt book with less cases on
and customer satisfaction and perception debt quicker and identifying older debt, which
hand which shows the debt book moving in
levels remained high. cannot be collected, as uncollectable. The high
the right direction.
level of penalties and interest as a proportion
Achieving our impact indicator targets will contribute to us achieving our long-term outcomes.
To view the full set of impact indicator results and targets, please see pages 84 to 88.
Our Outcomes
Revenue is available to fund government programmes People receive payments they are entitled to, enabling
The goals we are
through people meeting them to
aiming
payment obligations of their own accord participate in society
to achieve
Effectiveness
Our Impacts More customers
More customers The behaviour of
The difference we More customers register and report More customers pay
claim their correct non-compliant
want self-manage accurate information and file on time
entitlements customers improves
to make when required
Our Inputs
The way we use our People Systems Processes Assets
resources Economy
We retain, We proactively
We move
develop and influence We improve the
customers to We use our
attract high- voluntary efficiency and
cost-effective information to
Our Priorities calibre people compliance and effectiveness of
channels while make timely Our systems
The key areas we with the skills address the government
creating an decisions and meet current and
will direct our effort required in the causes of through working
environment to build an future needs
and resources to future enabling compliance risk with other
make it easy for intelligence-led
a culture of and threats agencies and
customers to organisation
service and through a range private providers
self-manage
excellence of interventions
Our Direction
We are reviewing our Outcomes Framework in 201516 to ensure it remains fit for
purpose and allows us to tell the clear performance story of how we will continue to
deliver today while achieving our strategic objectives. Our updated framework will
be included in our next Statement of Intent.
The mission, vision and values of IR for the future continue to guide us:
IR for the future also required us to change to overcome our challenges and meet our transformation goals.
As our change has become more tangible, we have sharpened our objectives, clarified how well achieve them and what well do
differently. That sharper focus is summarised in Our Change Story - why and how IR is changing.
1. Grow voluntary compliance by Link our systems across the Replace our computer system
making it easier for people to get government and Become truly digital
it right private sector
Upskill our people and change
2. Reduce customer compliance costs Fit revenue processes into the ways we work
3. Make Government policy changes customers broader lives
faster and more cost-effectively Make more intelligent use of
information
Tailoring
Intelligence Led
services &
channels
Embedding a
Providing greater customer-centric Embracing richer
self- approach data sources
management
I have the responsibility for establishing a system of internal control designed to provide
reasonable assurance as to the integrity and reliability of financial reporting and the
accuracy of our end of year performance information.
In my opinion, these financial statements fairly reflect the financial position and
operations of the department for the year ended 30 June 2015 and the forecast financial
statements reflect the financial position and operations of the department for the year
ending 30 June 2016 based on Government decisions and information as at 28 April 2015.
Naomi Ferguson
Chief Executive and Commissioner of Inland Revenue
29 September 2015
Countersigned by:
Giles Southwell
Chief Financial Officer
29 September 2015
Performance summary
33 94
201314 performance. Here is
a summary of our performance % %
by output class. For full details
on our performance against each
measure refer to pages 62 to 82. 1 of 3 15 of 16
201314 33% 1 of 3 201314 88% 14 of 16
201213 100% 1 of 1 201213 67% 12 of 18
93 14 of 15
%
100 9 of 9
%
SERVICES TO PROCESS Peak season planning also enabled us to MANAGEMENT OF DEBT AND
OBLIGATIONS AND ENTITLEMENTS maintain strong service levels across all our OUTSTANDING RETURNS
transactional channels over the peak season
What is intended to be achieved What is intended to be achieved
to end of June 2015. These include priority
This appropriation is intended to This appropriation is intended to increase funding
areas that help our customers the most,
contribute to the availability of revenue available for government programmes through
such as employer monthly schedules (EMS),
to fund government programmes by the collection of revenue owed.
income tax and GST refunds, returns and
ensuring taxpayer and other customer
regular social policy payments. Commentary on our output
payments, credit claims, refunds and
During the year we also successfully performance during 201415
entitlements are processed in a timely,
implemented legislative changes to the Of the eight performance measures in this
efficient and effective way.
Child Support Programme, maintaining our output class comparable to the previous year,
Commentary on our output high standard of service with over 82% of results for seven of them were either the same or
performance during 201415 applications issued within two weeks. improved from last year.
Of the 14 performance measures in this We continued a dedicated focus on overdue
output class comparable to last year, results returns between July and December 2014
for 10 of them were either the same or following the primary 7 July filing date for
improved from last year. income tax returns. This focus helped us achieve
We maintained strong performance across the performance target, to finalise returns
our core high transactional activities: within six months, for the second time since its
returns and payment processing and issuing introduction and demonstrates the success of
refunds and entitlements to customers. our early intervention approach.
We have reduced the child support debt owed
to custodial parents and contained the growth in
assessment debt for liable parents. We continued
our work with liable parents who live in New
Zealand using outbound calling campaigns,
similar to that successfully applied to tax debt
collection by making contact with liable parents
as early as possible. This has increased our level of
coverage and as a result we have closed a much
higher percentage of cases within 12 months of
opening than ever before.
5 6
100 8 of 8
%
50 1 of 2
%
201314 100% 8 of 8
New output class added 201415
201213 100% 8 of 8
TAXPAYER AUDIT Our focus on property compliance has SERVICES TO OTHER AGENCIES
What is intended to be achieved identified $67.1 million in discrepancies. What is intended to be achieved
We have continued to focus on
This appropriation is intended to ensure This appropriation is intended to provide
education and on identifying developer
that the revenue base for funding support services to other government
speculation, particularly in the Auckland
government programmes is protected agencies, such as the provision of a hosted
and Christchurch regions to ensure that
through auditing activities to prevent financial management information system
speculators and developers are paying the
non-compliance, and undertaking legal and shared financial transactional services.
correct amount of tax.
action where appropriate.
In the hidden economy area we continued Commentary on our output
Commentary on our output targeting people who intentionally do not performance during 201415
performance during 201415 declare or accurately report transactions. These measures are new in 201415.
Of the eight performance measures in this We have identified $146.0 million in We provide financial support services to
output class, results for five of them were discrepancies. the Department of Internal Affairs and the
either the same or improved from last year. Overall satisfaction with how we deal with New Zealand Productivity Commission.
We continued to focus our investigations on customers during an audit has improved These shared service arrangements have
areas that present the highest risk. This year, from last year and remains at a high level. been successful, with both agencies rating
our return on investment was 7.4% higher Of customers surveyed, seven out of 10 had us highly.
than target, resulting in a total of over a positive view about their audit activity In reviewing this years performance we
$1.2 billion in discrepancies being assessed. experience. have agreed with both agencies a more
This year, in our aggressive tax planning area We continue to work on improving appropriate target of 70% for 201516.
we identified $336.9 million in discrepancies. timeliness to complete audits and have
We continued to resolve the remaining reduced the average completion time in
optional and mandatory convertible note most categories since last year.
cases that have contributed $156.1 million
of discrepancies. Significant aggressive
tax planning cases provided a further
$180 million.
Description
This appropriation is limited to the provision of advice (including second opinion advice
and contributions to policy advice led by other agencies) to support decision-making by
Ministers on government policy matters.
Financial performance
OUTPUT STATEMENT FOR THE YEAR ENDED 30 JUNE 2015
201314 201415 201415 201415 201516
Actual Unaudited Unaudited Actual Unaudited
budget revised forecast
budget
$000 $000 $000 $000 $000
Revenue
Crown 8,166 8,051 9,151 9,151 8,000
Other 6 2 2 10 2
Total revenue 8,172 8,053 9,153 9,161 8,002
Expenses
Annual appropriations 8,118 8,053 9,153 8,128 8,002
Total expenses 8,118 8,053 9,153 8,128 8,002
Net surplus/(deficit) 54 1,033
Description
This output involves:
advising on all aspects of tax policy and social policy measures that interact with the
tax system
developing tax and social policy in line with the Generic Tax Policy Process
drafting tax legislation for introduction in the House of Representatives and assisting
its passage through the House of Representatives
negotiating and maintaining New Zealands network of double tax agreements with
other countries
forecasting future tax and non-tax Crown revenue receipts and disbursements for the
government
analysing revenue implications of changes in tax and social policy.
Description
The scope of this appropriation is limited to:
providing information and assistance to customers on the application of the law
responding to customer enquiries about tax and social support programmes
adjudication on behalf of the Commissioner on proposed taxpayer assessments
providing binding rulings and other statements on the interpretation and application
of the law administered by Inland Revenue
provision of services to Ministers to enable them to discharge their portfolio (other
than policy decision-making responsibilities).
Financial performance
$31.10 Telephone
Actual*
$29.88
Actual*
$30.41
Target*
$36.00
Target*: $40.00
201314 $33.00
Counter $64.89 $22.65 $65.00
Description
This output involves responding to customer enquiries on tax and social support
programmes (including child support and KiwiSaver) through electronic channels,
correspondence, telephone, personal appointments, actively providing advice through
a range of communication approaches delivered in the community and through our
complaints management service.
ACTIVITY FORECASTS
^Restated
Performance measures
All targets are unaudited.
Description
This output involves:
Adjudication
providing a technical review of existing taxation disputes referred to the Adjudication Unit
issuing an adjudication report (or other formal communication of conclusions) to the
parties concerned
directing the issuing, where required, of an assessment consistent with the conclusions
of the technical review.
Taxpayer Rulings
considering applications for and providing binding private and product rulings, and
financial arrangement determinations.
Public Rulings
preparing and issuing binding public rulings
developing and publishing non-binding statements on the Commissioners view of the
law administered by Inland Revenue eg, interpretation statements and interpretation
guidelines
considering applications for and providing taxpayer-specific depreciation
determinations
preparing and publishing depreciation and other determinations eg, livestock
valuations
considering and responding to technical correspondence.
Performance measures
All targets are unaudited.
Description
This output involves all activities associated with ministerial services, including
responding to ministerial correspondence and parliamentary questions. It includes all tax,
child support, student loan, KiwiSaver and family assistance ministerial correspondence
and supply of information.
Description
The scope of this appropriation covers:
registering taxpayers
making tax assessments
assessing child support liabilities including providing a readily accessible inexpensive
process for reviewing assessments
receiving and making payments to customers
processing applications and payments for social support programmes
collection of ACC Earners levies
supplying information to other government agencies
accounting and reporting the collection of Crown revenue.
Financial performance
Description
This output involves processing all registrations, applications and assessments for the tax
and social policy programmes we administer.
ACTIVITY FORECASTS
^ Restated
Performance measures
All targets are unaudited.
Description
This output involves:
issuing statements, notices, rebates and refunds
receiving and banking payments.
It covers all the tax and social policy programmes that we administer.
Performance measures
All targets are unaudited.
Description
This output involves dealing with child support assessments and providing an
administrative process for reviewing child support assessments that is both inexpensive
and readily accessible to custodians and liable parents.
Performance measures
All targets are unaudited.
Description
The scope of this appropriation covers taking action where returns are outstanding and
where payments are overdue, including providing people with assistance on the actions
they need to take to meet their obligations. This includes collection on behalf of other
agencies and external parties.
Financial performance
Additional funding for child support aims to progressively increase the amount of debt
repaid over a five year period. The total cash target for this period is $174 million. Work
to date has resulted in an extra $1.5 million recovered from liable parents.
Description
This output involves all activities associated with collecting outstanding returns,
including taking appropriate follow-up action against taxpayers who do not file a return.
Performance measures
All targets are unaudited.
Description
This output covers all activities associated with collecting overdue debt (excluding child
support debt). It involves taking both a preventative focus and appropriate follow-up
action when customers do not pay on time, including providing them with assistance on
how they can get back on track with their payment obligations.
Performance measures
All targets are unaudited.
Description
This output involves all activities associated with the recovery of overdue child support
payments. It includes taking appropriate enforcement action against parents who are less
inclined to pay for the support of their children.
Performance measures
All targets are unaudited.
Description
This output is limited to:
identifying risks to revenue and designing and undertaking audit activities accordingly
managing litigation of disputed tax cases.
Financial performance
Description
This output involves the auditing of taxpayers including individuals, small to medium businesses and larger businesses. It
includes audits of duties and non-residents.
Performance measures
All targets are unaudited.
Description
This output involves the management of litigation of disputed tax cases, including the
requirement to state the case through to resolution by the courts.
Performance measures
All targets are unaudited.
Description
This output is limited to the provision of services by Inland Revenue to other agencies,
where those services are not within the scope of another departmental output expense
appropriation in Vote Revenue.
Financial performance
Performance measures
All targets are unaudited.
Description
The scope of this appropriation is limited to the purchase or development of assets by
and for the use of the Inland Revenue Department, as authorised by section 24(1) of the
Public Finance Act 1989.
Financial performance
For details of departmental capital expenditure incurred against appropriations please
refer to the Statement of Budgeted and Actual Expenses and Capital Expenditure
Incurred Against Appropriations, in the Departmental capital expenditure lines
Property, plant and equipment, Intangible assets and Total departmental capital
expenditure on page 89.
For details of departmental capital injections please refer to page 90.
Performance measures
All targets are unaudited.
Factors that influenced target setting: this impact is key to enabling improved customer compliance and cost-effectiveness in a fiscally
constrained environment. We only include results for the contextual indicator under this impact customer compliance costs are
minimised when the data is less than two years old. The survey that this indicator uses was last undertaken in 2009 and results were
included in the 2011 Annual Report.
83
By June 2018
% of customers who are aware of their % Increase to
obligations and entitlements increases
YE June 2015
83% YE June 2014
85%
or more
82
By June 2018
% of customers who find it easy to % Increase to
comply increases
YE June 2015
80% YE June 2014
80%
or more
Factors that influenced target setting: this impact is key to improving customer self-management, reducing unneccessary contacts and
improving end-to-end planning.
88
By June 2018
% of returns filed without errors increases % Increase to
89
By June 2018
% of applications submitted without % Increase to
errors increases
YE June 2015
90% YE June 2014
90%
or more
99
By June 2018
% of correct student loan deductions % Maintain at
for New Zealand-based borrowers is
maintained July 2014 March 2015
99% July 2013
98%
or more
March 2014
95.6
Correlation
Employer registrations follow an % N/A
appropriate trend (contextual)
We report on this indicator to provide additional contextual YE June 2015
Correlation 98%
information. Employers correlation is between the number YE June 2014
of employers who register for PAYE and the percentage of the
labour force that is employed (from the Statistics New Zealand
Household Labour Force Survey).
98
Correlation
GST assessed to consumer spending % N/A
follows an appropriate trend (contextual)
We report on this indicator to provide additional contextual YE March 2015
Correlation 98%
information. This measure highlights a link between consumers YE March 2014
spending and the amount of GST assessed, showing the
completeness of information provided by GST customers.
No target has been set because this is an indicator that is beyond
our influence.
Factors that influenced target setting: the expected impact of the upcoming changes to Working for Families Tax Credits eligibility rules
has been taken into account when assessing our ability to improve accuracy.
67
Tax year 2017
% of accurate Working for Families Tax % Increase to
Credits payments increases
Payments are considered accurate if customers total yearly Tax year 2014
67% Tax year 2013
70%
or more
payments are within 20% of their entitlement. The accuracy of
payments is primarily a reflection of the quality of information
provided to us by our customers.
77
By June 2018
% of child support assessments collected % Increase to
increases
YE June 2015
75% YE June 2014
75%
or more
35
Correlation
Working for Families registrations follow %
an appropriate trend N/A
(contextual)
We report on this indicator to provide more context. Working YE July 2015
Correlation
for Families Tax Credits correlation is between the number of 32% YE June 2014
customers who receive payments from Inland Revenue and
the number of households with dependent children (from the
Statistics New Zealand Household Labour Force Survey).
Factors that influenced target setting: this impact is a key compliance driver and consequently stretch targets are appropriate.
83
Tax year 2017
% of returns filed on time is maintained % Maintain at
86
Tax year 2017
% of payments made by customers on % Maintain at
time is maintained
Tax year 2014
86% Tax year 2013
86%
or more
67
By June 2018
% of child support assessments paid on % Increase to
time increases
YE June 2015
65% YE June 2014
68%
or more
Factors that influenced target setting: the economic environment is a significant factor in debt performance. Maintaining or making
small improvements will be challenging.
77
By June 2018
The compliance behaviour of customers % Increase to
who received an audit intervention
improves YE June 2015
86% YE June 2014
85%
or more
YE June 2015
62% YE June 2014
65%
or more
15
By June 2018
% of collectable debt recovered increases % Increase to
YE June 2015
13% YE June 2014
13%
or more
5.8
By June 2018
% of collectable debt to revenue assessed % Decrease to
decreases
YE June 2015
6.8% YE June 2014
6.0%
or less
Appropriation Statements
The following statements report information about the expenses and capital expenditure incurred
against each appropriation administered by Inland Revenue for the year ended 30 June 2015.
STATEMENT OF BUDGETED AND ACTUAL EXPENSES AND CAPITAL EXPENDITURE INCURRED AGAINST APPROPRIATIONS
FOR THE YEAR ENDED 30 JUNE 2015
Other expenses
Transformation 55,000
Administration and use of another departments 973 244 244
appropriations
Total other expenses 973 244 244 55,000
1
Excludes remeasurement of ($1,999,000), (201314: $641,000).
2
The Revised Budget figures for 201415 are those included in The Supplementary Estimates of Appropriations and Supporting
Information for the year ending 30 June 2015.
3
Revenue-dependent appropriation (RDA). The amount of a RDA is limited to the amount of revenue earned.
The budget, revised budget and forecast figures have been prepared in accordance with NZ GAAP, using accounting policies that are
consistent with those adopted in preparing the departmental financial statements in part eight.
All of the 201415 performance information for each appropriation administered by Inland Revenue has been reported within part seven,
Measuring our performance.
STATEMENT OF EXPENSES AND CAPITAL EXPENDITURE INCURRED WITHOUT, OR IN EXCESS OF, APPROPRIATION OR
OTHER AUTHORITY
FOR THE YEAR ENDED 30 JUNE 2015
Inland Revenue has not received any capital injections during the year without, or in excess of, authority (201314: $nil).
Borrowing expenses
Adverse event interest PLA 12 10 20 (1) 10
Environmental restoration account interest PLA 1,636 2,000 2,000 1,634 2,000
Income equalisation interest PLA 7,260 7,000 15,000 3,543 15,000
Total borrowing expenses 8,908 9,010 17,020 5,176 17,010
Other expenses
Bad debt write-offs 930,158
Impairment of debt 3
94,902 6
Impairment of debt and debt write-offs4 1,162,098 1,180,356 860,829 1,179,224
Impairment of debt relating to child support 6
Impairment of debt relating to student loans 5
41,000 100,000 282,000 152,000 100,000
Initial fair value write-down relating to student loans 629,539 668,000 622,844 601,665 646,000
Total other expenses 1,695,599 1,930,098 2,085,200 1,614,494 1,925,224
1
PLA refers to appropriations established under a permanent legislative authority.
2
Historically Inland Revenue had made paid parental leave payments on the basis they had PLA. During 201314 it was identified they
did not have PLA. Refer to the Statement of Unappropriated Expenditure for details.
3
Impairment of debt relates to general tax, Working for Families Tax Credits and KiwiSaver debt.
Expenses
Personnel 2 431,986 457,750 467,030 463,668 503,944
Operating 3 194,845 177,191 179,820 176,867 183,745
Depreciation and impairment 4 13,440 16,848 12,708 12,497 12,362
Amortisation and impairment 5 37,925 38,528 31,052 31,032 42,638
Capital charge 6 21,616 22,031 22,031 22,031 22,166
Finance costs 7 74 34 148 36
Total expenses 699,886 712,382 712,641 706,243 764,891
The accompanying accounting policies and notes form part of these financial statements.
AS AT 30 JUNE 2015
Notes 201314 201415 201415 201415 201516
Actual Unaudited Unaudited Actual Unaudited
budget estimated forecast
actual
$000 $000 $000 $000 $000
Taxpayers' funds
Taxpayers' funds 275,392 277,729 277,093 277,092 279,539
Total taxpayers' funds 275,392 277,729 277,093 277,092 279,539
Represented by:
Current assets
Cash and cash equivalents 30,643 12,000 12,000 20,679 12,000
Debtor Crown 238,430 195,502 227,558 245,557 160,342
Debtors and prepayments 9 16,811 15,422 12,407 15,471 11,922
Inventories held for distribution 10 879 1,000 851 873 800
Total current assets 286,763 223,924 252,816 282,580 185,064
Non-current assets
Prepayments 9 834 66 795 328 42
Property, plant and equipment 4 55,450 59,176 46,330 45,689 43,968
Intangible assets 5 107,853 113,487 105,449 105,186 157,811
Total non-current assets 164,137 172,729 152,574 151,203 201,821
Current liabilities
Creditors and other payables 11 44,303 33,200 37,418 37,090 33,200
Surplus payable to the Crown 8 43,651 19,357
Employee entitlements 12 47,931 43,815 50,889 58,345 36,500
Provision for other liabilities 13 53 53 90 174
Derivative financial instruments 14 1
Finance leases 15 386 274 420 707 172
Other financial liabilities 16 183 205 271 275 176
Total current liabilities 136,508 77,494 89,051 115,864 70,222
Non-current liabilities
Employee entitlements 12 36,626 39,948 37,091 38,807 35,700
Provision for other liabilities 13 912 851 1,007 397 912
Finance leases 15 593 12 172 487
Other financial liabilities 16 869 619 976 1,136 512
Total non-current liabilities 39,000 41,430 39,246 40,827 37,124
The accompanying accounting policies and notes form part of these financial statements.
The goods and services tax (GST) (net) component of operating activities reflects the net GST paid to and received from Inland Revenue. The GST
components have been presented on a net basis, as the gross amounts do not provide meaningful information for financial statement purposes.
AS AT 30 JUNE 2015
Notes 201314 201415
Actual Actual
$000 $000
Capital commitments
IT equipment 372 589
Leasehold improvements 558 150
Intangible assets 2,841 2,284
Total capital commitments 3,771 3,023
The accompanying accounting policies and notes form part of these financial statements.
AS AT 30 JUNE 2015
Notes 201314 201415
Actual Actual
$000 $000
Contingent liabilities
Legal proceedings and disputes taxpayer 843 1,706
Personal grievances 30 30
Total contingent liabilities 19 873 1,736
Contingent assets
Legal proceedings and disputes taxpayer 2,867 2,647
Total contingent assets 19 2,867 2,647
The accompanying accounting policies and notes form part of these financial statements.
It is not intended that the forecast financial statements will be Sale of services
updated subsequent to presentation.
Sale of services are recognised in the accounting period the
The budget, estimated actual and forecast figures have been services are provided in, by reference to completion of specific
prepared in accordance with NZ GAAP, using accounting transactions, assessed on the basis of actual services provided
policies that are consistent with those adopted in preparing as a proportion of the total services to be provided.
these financial statements.
Revenue from recoveries
GST Revenue from recoveries is recognised as revenue when earned.
All items in the financial statements, and appropriation
statements, are stated exclusive of GST, except for debtor Sub-leases
Crown, net debtors and accounts payable, which are stated on Rental revenue from sub-leased property is recognised in the
a GST-inclusive basis. Where GST is not recoverable as input surplus or deficit on a straight-line basis over the term of the
tax, it is recognised as part of the related asset or expense. lease.
The net amount of GST owing to or from Inland Revenue Insurance proceeds
at balance date, being the difference between output GST
and input GST, is included in creditors and other payables or Insurance claim proceeds are recognised as revenue when
debtors and prepayments in the Statement of Financial Position. the claim has been accepted by the insurer or when receipt
of the insurance proceeds is considered virtually certain. The
The net GST paid to or received from Inland Revenue, including insurance proceeds will be disclosed as a contingent asset if the
the GST relating to investing and financing activities, is classified receipt is only probable.
as an operating cash flow in the Statement of Cash Flows.
Capital charge
Commitments and contingencies are disclosed exclusive of GST.
The capital charge is recognised as an expense in the period to
Income tax which the charge relates.
Government departments are exempt from income tax as Foreign currency transactions, hedge
public authorities, so accordingly, no charge for income tax has
accounting, and hedging activities
been provided for.
Inland Revenues activities expose it primarily to risks
Revenue of changes in foreign exchange rates. Foreign currency
Revenue is measured at the fair value of consideration received transactions (including those for which forward exchange
or receivable. contracts are held) are translated into New Zealand dollars
using the spot exchange rates at the dates of the transactions.
Revenue is recognised as follows: Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
Revenue Crown year end exchange rates of monetary assets and liabilities
Revenue Crown transactions are considered to be non- denominated in foreign currencies are recognised in the
exchange transactions. surplus or deficit.
Revenue Crown is measured based on Inland Revenues funding For certain commitments Inland Revenue uses derivative
entitlement for the reporting period. The funding entitlement financial instruments (primarily, foreign currency forward
is established by Parliament when it passes the Appropriation exchange contracts) to mitigate its risks associated with
Inland Revenue has intangible assets in the form of internally Internally generated intangible assets $50,000 and over
generated intangible assets and software licenses. Software licences $5,000 and over
Employee contractual entitlements The provision is measured at the present value of the lower
of the expected cost of terminating the contract and the
Years of service accrued to balance date and years remaining
expected net costs of continuing with the contract.
to entitlement
Present value of the estimated future cash outflows using an Taxpayers funds
applicable discount rate and salary inflation rate. This is the Crowns net investment in Inland Revenue. It is
Sick leave, annual leave, and vested long-service leave are measured as the difference between total assets and total
classified as a current liability. Non-vested long-service leave and liabilities. Taxpayers funds are disaggregated and classified into
retiring leave liabilities expected to be settled within 12 months a number of components:
of balance date are classified as a current liability. All other Capital injection
employee entitlements are classified as a non-current liability.
Capital withdrawal
Superannuation schemes Repayment of surplus to the Crown.
Obligations for contributions to the Inland Revenue
Statement of Cash Flows
Superannuation Scheme, State Sector Retirement Savings
Scheme, KiwiSaver, and the Government Superannuation Fund Cash and cash equivalents mean cash balances in bank
are accounted for as defined contribution schemes and are accounts.
recognised as an expense in the surplus or deficit as they are Operating activities include cash received from all revenue
incurred. sources of Inland Revenue, and cash payments made for the
supply of goods and services.
Termination benefits
Termination benefits are payable when an employees Investing activities are those activities relating to the acquisition
employment contract is terminated before their normal and disposal of non-current assets.
retirement or when an employee accepts voluntary Financing activities comprise capital injections by, or repayment
redundancy in exchange for these benefits. Inland Revenue of capital to, the Crown.
recognises the expenditure in the surplus or deficit when it is
demonstrably committed to either terminate the employment Commitments
of current employees, according to a detailed formal plan Expenses and liabilities yet to be incurred on non-cancellable
without the possibility of withdrawal, or as a result of an offer contracts that have been entered into on or before balance
for voluntary redundancy. date are disclosed as commitments to the extent that they
Termination benefits to be settled within 12 months are are unperformed obligations. Information on non-cancellable
reported at the amount expected to be paid, otherwise they are capital and lease commitments is reported in the Statement
reported as the present value of the estimated future cash outflows. of Commitments. Cancellable capital commitments that
have penalty or exit costs explicit in the agreement on
Provisions exercising that option to cancel are reported in the Statement
Inland Revenue recognises a provision for future expenditure of Commitments at the lower of the remaining contractual
of uncertain amounts or timing where there is a present commitment and the value of those penalty or exit costs (i.e.
obligation (either legal or constructive) as a result of a past the minimum future payments).
event, and it is probable that expenditure will be required to
settle the obligation, and a reliable estimate can be made of the
Contingent liabilities and assets
amount of the obligation. Provisions are not recognised for net Contingent liabilities and assets are recorded in the Statement
deficits from future operating activities. of Contingent Liabilities and Contingent Assets at the point
at which the contingency is evident. Contingent liabilities
Provisions are recorded at the best estimate of the expenditure are disclosed if the possibility that they will crystallise is not
required to settle the obligation. Provisions to be settled remote. Contingent assets are disclosed if it is probable that
beyond 12 months are recorded at their present value and are the benefits will be realised. Insurance claim proceeds are
discounted using market yields on government bonds at balance disclosed as a contingent asset if the receipt of the insurance
date with terms to maturity that match, as closely as possible, proceeds is probable.
the estimated timing of the future cash flows. The increase in
Other indirect costs and corporate overheads that cannot be Variations to forecast
attributed directly to a business process are apportioned to The actual financial results for the forecast period covered
outputs based on planned business process activity allocation are likely to vary from the information presented in these
to outputs. forecasts. Factors that may lead to a material difference
between information in these forecast financial statements and
There have been no material changes in cost allocation policies
the actual reported results include:
since the date of the last audited financial statements.
Changes to the budget through initiatives approved by
Comparatives Cabinet
Certain comparative information has been reclassified, where Technical adjustments to the budget including transfers
required, to conform with the current years presentation. between financial years
The timing of expenditure relating to significant programmes
CHANGES IN ACCOUNTING POLICIES
and projects.
For the preparation of the Departments financial statements,
forecast financial statements and output statements within Any changes to budgets during 201516 will be incorporated
part seven, Measuring our performance as at 30 June 2015 into The Supplementary Estimates of Appropriations for the year
there have been no changes in accounting policies and cost ending 30 June 2016.
allocation policies since the date of the last audited financial
statements. All policies have been applied on a basis consistent
with the previous year.
NOTE 2: PERSONNEL
201314 201415 201415 201516
Actual Unaudited Actual Unaudited
budget forecast
$000 $000 $000 $000
Salaries and wages 371,178 395,310 388,272 409,770
Contractors and temporary staff 37,489 39,926 45,328 70,203
Employer contributions to defined contribution plans 11,745 11,952 12,181 12,790
Retiring, long-service and sick leave 242 3,000 5,109 3,000
Terminating benefits 1,926 2,051 1,995 2,106
ACC levies 1,536 1,714 1,653 2,036
Annual leave 1,114 759 1,585 1,589
Bonuses 258 275 223 235
Other 6,498 2,763 7,322 2,215
Total personnel 431,986 457,750 463,668 503,944
Cost
Balance as at 1 July 2013 65,621 29,298 4,904 53,003 4,334 157,160
Additions by purchase 4,935 1,437 8,388 184 14,944
Other movements1 (175) (175)
Transfers between category 25 3,905 (3,112) 818
Disposals (13,910) (11) (309) (3,110) (17,340)
Balance as at 30 June 2014 56,671 30,724 4,595 62,011 1,406 155,407
Carrying amount as at 30 June 2014 9,439 7,196 3,087 34,322 1,406 55,450
There is no restriction over the title of Inland Revenues property, plant and equipment, nor is any property, plant and equipment
pledged as security for liabilities.
1
This relates to the addition/reduction of lease make-good costs on leased buildings.
2
The depreciation charge for existing assets that are used in the development of intangible assets.
Finance leases Inland Revenue has entered into an agreement for the provision of telecommunications services that includes
embedded finance leases. The net carrying amount of these finance leases within the IT equipment category is $1,117,000 (201314:
$935,000).
Cost
Balance as at 1 July 2013 465,001 124,343 26,517 615,861
Additions by purchase 5,445 5,445
Additions internally developed 6,826 17,706 24,532
Transfers between category 13,009 369 (14,196) (818)
Disposals (5,969) (4,354) (10,323)
Balance as at 30 June 2014 478,867 125,803 30,027 634,697
There is no restriction over the title of Inland Revenues intangible assets, nor are any intangible assets pledged as security for
liabilities.
1
Refers to the amortisation charge for existing assets that are utilised in the development of intangible assets.
Given their short-term nature, the carrying value of accounts receivable and other debtors approximates their fair value.
Overdue receivables have been assessed for impairment and appropriate provisions applied, as detailed below:
201314
Not past due 3,061 3,061
Past due 1 to 30 days 2,107 2,107
Past due 31 to 60 days 299 299
Past due 61 to 90 days 26 26
Past due > 90 days 79 (8) 71
Total 5,572 (8) 5,564
The provision for impairment has been calculated based on expected losses for Inland Revenues debtors. Expected losses have been
determined based on a review of each debtor.
Movements in the provision for impairment are as follows:
201314 201415
Actual Actual
$000 $000
Opening balance (9) (8)
Additional provisions made during the year (8) (9)
Unused amounts reversed
Receivables written off during the year 9 3
Closing balance (8) (14)
Creditors and other payables are normally settled on 30-day terms, therefore the carrying value of creditors and other payables
approximates their fair value.
201314 201415
Actual Actual
$000 $000
Opening balance 2,410 886
Additional provisions made 1,907 1,995
Amounts used (3,431) (1,940)
Unused amounts reversed
Closing balance 886 941
The closing 201415 provision is expected to be fully utilised in the 201516 year.
Non-current liabilities
Onerous contracts 397
Lease make-good 912
Total non-current liabilities 912 397
Onerous contracts
The provision for onerous contracts arises from non-cancellable accommodation leases where the unavoidable costs of meeting the
lease contract exceed the economic benefits to be received from it. Inland Revenue currently leases one property that includes some
residual floor space which is not currently being utilised. The residual floor space is available for sub-lease but there is no certainty that
the space can be sub-let due to it being part of one floor. The potential cost of a floor reconfiguration may outweigh the benefit of a
new sub-leasing agreement. The lease is due to expire in December 2020.
Lease make-good
As a result of changes in lease arrangements Inland Revenue no longer has any lease make-good obligations at 30 June 2015. In
201314 and prior years as a condition of some of its leasing arrangements, Inland Revenue was required at the expiry of the lease
term to make-good any damage caused to the premises and remove any fixtures and fittings it had installed.
Represented by:
Current 386 707
Non-current 593 487
Total finance leases 979 1,194
Inland Revenue has entered into an agreement for the provision of telecommunications services that includes embedded finance
leases. The leased items are included within the net carrying amount of IT equipment (refer Note 4).
Inland Revenue has no rights of renewal and no option to purchase the assets at the end of the lease term.
There are no restrictions placed on Inland Revenue by any of the finance leasing arrangements.
Finance lease liabilities are effectively secured, as the rights to the leased assets reverts to the lessor in the event of default in
payment.
Current liabilities
Leasing incentives 183 275
Total current liabilities 183 275
Non-current liabilities
Leasing incentives 869 1,136
Total non-current liabilities 869 1,136
Operating commitments
Operating commitments for non-cancellable accommodation leases relate to Inland Revenues long-term leases on its premises at
many locations throughout New Zealand. The annual lease payments are reviewed regularly, and the amounts disclosed as future
commitments are based on current rental rates. These commitments also include office space vacated by Inland Revenue as a result
of organisational restructuring and sub-leasing. Provision has been made in the financial statements for the expected net expenses
for the duration of these leases.
The total minimum future sub-lease payments expected to be received under non-cancellable sub-leases at balance date is
$13,632,426 (201314: $12,294,537). The increase is mainly due to an upcoming establishment of a co-located building in Tauranga
with another government agency. The co-location is expected to take place in the 201617 financial year.
Inland Revenues non-cancellable operating leases have varying terms, escalation clauses and renewal rights. There are no
restrictions placed on Inland Revenue by any of its leasing arrangements.
Personal grievances
Personal grievances represent amounts claimed by employees for alleged breaches of contract against Inland Revenue.
Contingent assets
Legal proceedings and disputes taxpayer
This contingent asset relates to potential court costs recoverable by Inland Revenue for court costs associated with tax disputes
and other legal proceedings being taken through the courts against taxpayers. It only relates to court costs; the actual revenue
(tax) under dispute is recognised as a non-departmental contingency (refer to part nine, Schedule of Non-departmental Contingent
Liabilities and Contingent Assets).
The expected value of the contingent asset is calculated using an outcome probability model that weighs the total potential court
costs recoverable against outcome probabilities.
The contingent asset as at 201415 was $2,646,669 (201314: $2,867,162).
201314 201415
Actual Actual
Leadership team, including the Chief Executive
Remuneration and other benefits $3,334,000 $3,526,000
Full-time equivalents 10 10
Key management personnel comprise the Minister of Revenue, the Commissioner, five Deputy Commissioners, Chief Tax
Counsel, Chief Financial Officer, Chief Technology Officer, Chief People Officer and those formally acting in those positions
during the financial year. The Commissioners remuneration is determined and paid by the State Services Commission.
The above key management personnel disclosure excludes the Minister of Revenue. The Ministers remuneration and other
benefits are set out by the remuneration authority, are not received only for his role as a member of key management personnel
of Inland Revenue and are not paid by Inland Revenue.
Valuation Technique
Quoted market Observable Significant non - Total
price inputs observable inputs
$000 $000 $000 $000
201415
Financial liabilities
Foreign exchange derivatives
201314
Financial liabilities
Foreign exchange derivatives 1 1
There were no transfers between the different levels of the fair value hierarchy.
Market risk
Currency risk
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates
is called currency risk.
Because Inland Revenue purchases fixed assets and services from overseas suppliers it is exposed to currency risk arising from
various currency exposures, primarily for the United States and Australian dollars. Currency risk arises from future purchases of
fixed assets and services which are denominated in a foreign currency.
Inland Revenue has policies in place to manage the risks associated with financial instruments and, being risk averse, seeks to
minimise exposure from its treasury activities.
Under its foreign exchange policy, Inland Revenue enters into foreign currency forward exchange contracts to manage foreign
exchange exposures when single foreign exchange transactions exceed NZ $100,000, or the transaction exposure for an individual
currency exceeds NZ $100,000. This policy has been approved by Treasury and is in line with the requirements of Treasurys
Guidelines for the Management of Crown and Departmental Foreign Exchange Exposure.
Credit risk
The risk that a third party will default on its obligations to Inland Revenue, causing a loss to be incurred is called credit risk. In the
normal course of its business, credit risk from debtors and receivables is concentrated with the Crown and other government agencies.
The carrying amount of financial assets recognised in the Statement of Financial Position best represents Inland Revenues maximum
exposure to credit risk at balance date.
Inland Revenue does not require any collateral, security, or other credit enhancements to support financial instruments with financial
institutions that it deals with, because these entities have high credit ratings. Westpac is Inland Revenues main bank and has a
Standard and Poors credit rating of AA. Inland Revenue enters into foreign currency transactions with the NZDMO (Standard and
Poors credit rating of AA). For its other financial instruments, Inland Revenue does not have significant concentrations of credit risk.
The carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated is not
material.
Liquidity risk
Liquidity risk is the risk that Inland Revenue will encounter difficulty raising liquid funds to meet commitments as they fall due.
As all but an insignificant proportion of funds come from the New Zealand Government and cash is drawn down on a fortnightly
basis, Inland Revenue does not have significant liquidity risk. In meeting its liquidity requirements, Inland Revenue closely monitors
its forecast cash requirements with expected cash drawdowns from the NZDMO. Inland Revenue maintains a target level of
available cash to meet liquidity requirements.
201314
Creditors and other payables 11 32,980 32,980 32,980 32,980
Finance lease liabilities 15 979 1,028 441 587 1,028
Other financial liabilities 16 1,052 861 183 489 189 861
Closing balance 35,011 34,869 33,604 1,076 189 34,869
201314
Gross settled forward foreign 14 1
exchange contracts
Outflow 95 95
Inflow
1 95 95
Corporate tax
Gross companies tax 10,617,384 10,686,000 10,900,000 10,526,789 11,096,000
Refunds (192,338) (207,000) (152,000) (142,608) (148,000)
Non-resident withholding tax 427,714 481,000 486,000 470,073 506,000
Foreign-source dividend withholding payments 8,213 2,000 (2,000) (3,438) 2,000
Total corporate tax 10,860,973 10,962,000 11,232,000 10,850,816 11,456,000
Other revenue
Child support 204,6742 229,620 187,350 196,985 200,250
Interest unwind student loans 579,318 601,000 596,000 604,175 605,000
Other revenue 86,059 92,000 76,000 86,341 78,000
Total other revenue 870,051 922,620 859,350 887,501 883,250
Borrowing expenses
Adverse event interest 12 10 20 (1) 10
Environmental restoration account interest 1,636 2,000 2,000 1,634 2,000
Income equalisation interest 7,260 7,000 15,000 3,543 15,000
Total borrowing expenses 8,908 9,010 17,020 5,176 17,010
Other expenses
Impairment of debt and debt write-offs1 1,025,0602 1,162,098 875,972 860,829 1,179,224
Impairment of debt relating to child support 2
Impairment of debt relating to student loans 12,000 100,000 253,000 269,000 100,000
Initial fair value write-down relating to student loans 629,539 668,000 606,000 601,665 646,000
Total other expenses 1,666,599 1,930,098 1,734,972 1,731,494 1,925,224
1
Impairment of debt and debt write-offs relates to general tax, Working for Families Tax Credits and KiwiSaver debt.
2
These numbers are restated due to the transition to the new PBE accounting standards. Refer to Note 9 for details.
The accompanying accounting policies and notes form part of these financial schedules.
For a full understanding of the Crowns financial position and the results of its operations, refer to the Financial Statements of the
Government of New Zealand for the Year Ended 30 June 2015.
AS AT 30 JUNE 2015
Notes 201314 201415 201415 201415 201516
Actual Unaudited Unaudited Actual Unaudited
budget estimated forecast
actual
$000 $000 $000 $000 $000
Current assets
Cash and cash equivalents 2,489,327 1,355,000 1,200,000 1,768,113 1,075,000
Receivables 1 8,228,2411 7,775,600 7,971,600 7,511,685 8,437,000
Receivables child support 2 10,899 13,720 10,899 12,001 10,899
Receivables other 111,065 128,352 128,352 97,120 133,352
Student loans 3 1,193,000 1,219,000 1,161,000 1,122,000 1,251,000
Total current assets 12,032,532 10,491,672 10,471,851 10,510,919 10,907,251
Non-current assets
Receivables 1 467,400 438,400 467,400 441,300 467,400
Receivables child support 2 64,506 72,325 71,506 67,037 77,166
Student loans 3 7,522,829 7,804,993 7,717,476 7,742,382 7,919,536
Total non-current assets 8,054,735 8,315,718 8,256,382 8,250,719 8,464,102
Non-current liabilities
Reserve schemes 6 245,937 294,968 429,437 339,279 362,437
Total non-current liabilities 245,937 294,968 429,437 339,279 362,437
The accompanying accounting policies and notes form part of these financial schedules.
For a full understanding of the Crowns financial position and the results of its operations, refer to the Financial Statements of the
Government of New Zealand for the Year Ended 30 June 2015.
1
This number is restated due to the transition to the new PBE accounting standards. Refer to Note 9 for details.
2
This number is restated due to the flow-on effect from the Schedule of Non-departmental Revenue and the Schedule of Non-
departmental Expenditure on the transition to the new PBE accounting standards. Refer to Note 9 for details.
The accompanying accounting policies and notes form part of these financial schedules.
For a full understanding of the Crowns financial position and the results of its operations, refer to the Financial Statements of the
Government of New Zealand for the Year Ended 30 June 2015.
SCHEDULE OF NON-DEPARTMENTAL
CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
AS AT 30 JUNE 2015
Notes 201314 201415
Actual Actual
$000 $000
Quantifiable contingent liabilities
Legal proceedings and disputes assessed 7 535,388 148,178
Unclaimed monies 5 111,804 120,221
Total quantifiable contingent liabilities 647,192 268,399
There were no non-quantifiable contingent liabilities and contingent assets for the year ended 30 June 2015 (201314: $nil).
The accompanying accounting policies and notes form part of these financial schedules.
For a full understanding of the Crowns financial position and the results of its operations, refer to the Financial Statements of the
Government of New Zealand for the Year Ended 30 June 2015.
KiwiSaver
KiwiSaver returned transactions trust account 44 102 146
Total KiwiSaver 44 102 146
The child support trust accounts were established in accordance with sections 139 and 140 of the Child Support Act 1991. Inland
Revenue administers these trust accounts for amounts collected from liable parents and the subsequent child support payments
that are paid to the custodial parents.
The KiwiSaver trust account was established in accordance with section 74(4) of the KiwiSaver Act 2006. Inland Revenue
administers this account to hold money deposited with the Crown from KiwiSaver scheme providers, primarily for refunds and
payments made in error, pending the completion of the financial transaction.
The accompanying accounting policies and notes form part of these financial schedules.
For a full understanding of the Crowns financial position and the results of its operations, refer to the Financial Statements of the
Government of New Zealand for the Year Ended 30 June 2015.
These financial schedules are for the year ended 30 CRITICAL ACCOUNTING ESTIMATES
June 2015 and include forecast financial schedules for The estimates and assumptions that have a significant risk
the year ending 30 June 2016. The schedules have been of causing a material adjustment to the carrying amounts of
combined to provide a single view of actual, budget and receivables and payables within the next financial year are
forecast information. referred to below:
These financial schedules are the first prepared in accordance Other critical accounting estimates
with the new Tier 1 Public Benefit Entity (PBE) accounting Material estimates and assumptions impact on receivables,
standards. The material adjustments arising on transition are student loan debt and refundables and payables. See Notes 1, 3
explained in Note 9. and 4 for more information on these.
There are no other new relevant standards and interpretations
issued this year and Inland Revenue has not early adopted any ACCOUNTING POLICIES
new standards and interpretations. The following accounting policies, which materially affect the
measurement of financial results and financial position, have
been applied.
134 ANNUAL REPORT 2015
09
Budget and forecast figures life of the financial asset to that assets net carrying amount.
Effective interest rates are assigned to new lending each year on
The budget figures for 201415 are those included in The
a year of lending basis.
Estimates of Appropriations for the year ending 30 June 2015.
The estimated actual figures for 201415 and the forecast Expenses
figures for 201516 are those included in The Estimates of Expenses are recognised in the period to which they relate.
Appropriations for the year ending 30 June 2016. The estimated
actual figures represent forecasts submitted to the Treasury Cash and cash equivalents
based on all Government decisions and assumptions as at Cash and cash equivalents include cash on hand, cash in
28 April 2015. transit and funds held in bank accounts administered by Inland
The budget, estimated actual and forecast figures have been Revenue.
prepared in accordance with NZ GAAP, using accounting
policies that are consistent with those adopted in preparing
Receivables
these financial schedules. Receivables include taxes and Working for Families Tax Credits
(and any penalties and interest associated with these activities)
Revenue and exclude student loans and child support debt.
Operating revenue Receivables are initially assessed at nominal value, that is, the
The payment of tax in itself, does not entitle a taxpayer to an receivable reflects the amount of tax owed or Working for
equivalent value of services or benefits, because there is no Families Tax Credits payable. The nominal value of receivables at
direct relationship between paying tax and receiving Crown recognition does not materially differ from their fair value at that
services and transfers, that is, tax revenue is a non-exchange point, taking into consideration the effects of uncollectability
transaction. and discounting of future cashflows to present value.
Tax revenue is recognised when a taxable event has occurred, Receivables are subsequently adjusted for penalties and interest
the tax revenue can be reliably measured and it is probable as they are charged, and tested for impairment annually.
that economic benefits will flow to the Crown. The taxable Interest and penalties charged on receivables are presented as
event is defined as follows: revenue in the Schedule of Non-departmental Revenue.
Allowances for estimated irrecoverable amounts are recognised
Tax type Taxable activity when there is objective evidence that the asset is impaired.
Income tax The earning of assessable income Impairment movements are recognised in the Schedule of Non-
during the taxation period by the departmental Expenditure. Impairment losses can be reversed
taxpayer.
where there is evidence that the impaired value of the asset has
increased.
Goods and services tax The purchase or sale of taxable
Financial models have been constructed for Inland Revenue to
goods and services during the
calculate the impairment of Crown debt. These models apply
taxation period.
a number of assumptions on future repayment behaviour as
The New Zealand tax system is predicated on self-assessment well as economic assumptions such as the discount rate and
where taxpayers are expected to understand the tax laws and inflation.
comply with them. This has an impact on the completeness
of tax revenues when taxpayers fail to comply with tax Receivables child support
laws, for example, if they do not report all of their income. Child support receivables consist of penalties applied when
Inland Revenue has implemented systems and controls in a non-custodial parent is in default. These receivables are
order to detect and correct situations where taxpayers are initially recognised at fair value and are assessed annually for
not complying with the various acts it administers. These impairment.
systems and controls include performing audits of taxpayer
records where determined necessary by Inland Revenue. Financial instruments
Such procedures cannot be expected to identify all sources Financial assets
of unreported income or other cases of non-compliance with
tax laws. Inland Revenue is unable to estimate the amount of Student loans
unreported tax. Student loans are designated as loans and receivables
under PBE IPSAS 29 Financial Instruments: Recognition and
Interest unwind student loans Measurement. Student loans are recognised initially at fair
Interest unwind on student loans is accrued using the effective value, plus transaction costs, and subsequently measured at
interest rate method. The effective interest rate exactly amortised cost using the effective interest rate method, and
discounts estimated future cash receipts through the expected adjusted for impairment movements. Fair value on initial
recognition of student loans is determined by projecting
201314 201415
Actual Actual
$000 $000
Receivables
Gross receivables 13,162,0762 12,145,147
Impairment receivables (4,466,435) 2
(4,192,162)
Carrying value receivables 8,695,641 7,952,985
Receivables impairment
Opening balance 4,371,533 4,466,435
Impairment losses recognised 1,025,060 2
860,829
Amounts written off as uncollectable (930,158) (1,135,102)
Closing balance 4,466,435 4,192,162
1
Figures are based on debt elements (a specific tax type and time period for which a debt is due). They are not comparable with
the figures in the Additional Information section, which are based on debt cases (one debt case can have one or more debt
elements) and also include overdue student loan debt.
2
These numbers are restated due to the transition to the new PBE accounting standards. Refer to Note 9 for details.
Receivables are classified as past due when any outstanding revenue is not paid by the taxpayers due date. Due dates will vary,
depending on the type of revenue outstanding (e.g. income tax, GST, KiwiSaver) and the taxpayers balance date. Past due debt
includes debt collected under instalment, debt under dispute, default assessments and debts of taxpayers who are bankrupt,
201314 201415
Recoverable amount of receivables not due ($000) 7,648,373 1
6,954,717
Recoverable amount of receivables past due ($000) 1,047,268 998,268
Use-of-money-interest rate 8.40% 9.21%
Discount rate 6.00% 6.00%
Impact on the recoverable amount of a 2% increase in discount rate ($000) (21,000) (20,000)
Impact on the recoverable amount of a 2% decrease in discount rate ($000) 22,000 21,000
1
This number is restated due to the transition to the new PBE accounting standards.
The fair value of receivables is not materially different from the carrying value.
Credit risk
In determining the recoverability of receivables Inland Revenue uses information about the extent to which the taxpayer is
contesting the assessment and experience of the outcomes of such disputes, from lateness of payment and other information
obtained from credit collection actions taken.
Under the Tax Administration Act 1994 Inland Revenue has broad powers to ensure that people meet their obligations. Part 10 of
the Act sets out the powers of the Commissioner to recover unpaid tax.
The Crown does not hold any collateral or any other credit enhancements over receivables which are past due.
Receivables are widely dispersed over a number of taxpayers and as a result the Crown does not have any material individual
concentrations of credit risk.
201314 201415
Actual Actual
$000 $000
Receivables child support
Gross receivables 2,372,026 2,605,488
Impairment receivables (2,296,621) (2,526,450)
Total receivables child support 75,405 79,038
1
This is to comply with the new PBE accounting standards. Refer to Note 9 for details.
201314 201415
Actual Actual
$000 $000
Opening carrying value 8,288,177 8,715,829
Repayments (1,031,664) (1,113,751)
Borrowings transferred from Ministry of Social Development 1,521,537 1,528,794
Fair value write-down on new borrowings (629,539) (601,665)
Impairment (12,000) (269,000)
Interest unwind 579,318 604,175
Closing carrying value student loans 8,715,829 8,864,382
201314 201415
Carrying value
Carrying value ($000) 8,715,829 8,864,382
Effective interest rate 7.06% 7.00%
Interest rate applied to loans for overseas borrowers 5.1% 6.2% 4.5% 6.2%
Consumer price index 1.8% 2.5% 0.3% 2.5%
Future salary inflation 2.8% 3.5% 2.3% 3.5%
201314 201415
Fair value
Fair value ($000) 8,924,000 9,267,000
Discount rate 6.62% 6.20%
Impact on fair value of a 1% increase in discount rate ($000) (448,000) (492,000)
Impact on fair value of a 1% decrease in discount rate ($000) 501,000 554,000
Fair value is the amount for which the loan book could be exchanged between knowledgeable, willing parties in an arms-length
transaction as at 30 June 2015. It is determined by discounting the future cash flows at an appropriate discount rate.
Fair values will differ from carrying values due to changes in market interest rates, as the carrying value is not adjusted for such
changes whereas the fair value was calculated on a discount rate that was current at 30 June 2015. At that date, the fair value
was calculated on a discount rate of 5.66% which excludes expenses whereas a weighted average discount rate of 7.00% including
expenses was used for the carrying value. For reference, the representative discount rate for fair value including an allowance for
expenses is 6.20%.
The Student Loan Scheme Annual Report 2014/15 contains more information on the student loan scheme.
Impairment of student loans in 201415 totalled $269 million. This impairment is mainly due to data and modelling changes.
Extensive modelling enhancements were made to the income sub-models. The changes focussed on better reflecting the poorer
employment prospects arising after the Global Financial Crisis for those with lower qualifications. Macroeconomic changes
contributed to the impairment expense as well. All of the economic assumptions have fallen significantly since the previous
valuation. Actual repayments were lower than forecast. To reflect expected improvements in employment rates and repayment
compliance, an adjustment was made to reverse some of the modelling impairment loss.
In 201314 the impairment of student loans totalled $12 million. This was driven by lower than expected incomes and repayments
as well as changes to macroeconomic assumptions for income recovery and earnings inflation.
The valuation data is still very sensitive to changes in certain areas as can be seen from the sources of impairment set out below:
201314 201415
Actual Actual
$000 $000
Sources of impairment
Policy and legislative changes 53,000
Experience variance (2,000) (40,000)
Macroeconomic changes 29,000 (117,000)
Remaining model and data changes (92,000) (262,000)
Adjustments for expected improvements 150,000
Total sources of impairment (12,000) (269,000)
Credit risk
Credit risk is the risk that borrowers will default on their obligation to repay their loans or die before their loan is repaid, causing
the scheme to incur a loss.
The student loan scheme does not require borrowers to provide any collateral or security to support advances made. As the total
sum advanced is widely dispersed over a large number of borrowers, the student loan scheme does not have any material individual
concentrations of credit risk.
201314 201415
Actual Actual
$000 $000
KiwiSaver payable 943,133 917,020
Paid parental leave payable 6,659 7,894
Taxes refundable 3,539,453 1
3,386,708
Total refundables and payables 4,489,245 4,311,622
1
These numbers are restated due to the transition to the new PBE accounting standards. Refer to Note 9 for details.
The adverse event income equalisation scheme operates in addition to the income equalisation scheme. Deposits earn interest at
a rate of 6.5% per annum from the date of receipt until the deposit is refunded. Deposits can be withdrawn immediately, but are
transferred to the main income equalisation account if not withdrawn within 12 months of the deposit.
The environmental restoration account allows businesses to set aside money to cover restoration costs for monitoring, avoiding,
remedying or mitigating the detrimental environmental effects which may occur in later years. Interest is calculated at a rate of 3%
per annum and is payable from the day after the deposit is made until the day before a refund is made. Refunds will be made when
the environmental restoration costs are incurred.
The income equalisation scheme allows taxpayers in the farming, fishing and forestry industries to make payments during the year
by way of income equalisation deposits. Interest paid at a rate of 3% per annum will apply where a deposit is left in the scheme for
a period of 12 months or more.
Unclaimed monies
Unclaimed monies are repaid to the entitled owner on proof of identification. Based on trends from prior years, the estimated likely
amount of unclaimed monies that will be paid out is recorded as a liability in the Schedule of Non-departmental Liabilities and the
remainder is recorded as a contingent liability in the Schedule of Non-departmental Contingent Liabilities and Contingent Assets.
Contingent assets
Disputes non-assessed
Contingent assets arise as part of the tax dispute process, for example, when Inland Revenue has advised a taxpayer of a proposed
adjustment to their tax assessment through a notice of proposed adjustment (NOPA). At this point there has been no amended
assessment issued and no revenue has been recognised so these adjustments are recorded in the Schedule of Non-departmental
Contingent Liabilities and Contingent Assets as disputes non-assessed. The taxpayer has the right to dispute this adjustment and a
disputes resolution process is entered into. Inland Revenue quantifies a contingent asset based on the likely cash collectable for the
disputes process based on experience and similar prior cases, net of losses carried forward.
Contingent assets can also arise where the taxpayer has not filed an assessment but Inland Revenue believes they are liable for
tax. In this situation Inland Revenue will issue an assessment. Where the taxpayer chooses to dispute the Inland Revenue initiated
assessment, the assessment is not recognised as revenue and a contingent asset is recorded in the Schedule of Non-departmental
Contingent Liabilities and Contingent Assets. The value of the asset is based on the likely collectable portion of the default assessment,
net of losses carried forward.
201314 201415
Actual Actual
$000 $000
Earner levy 1,546,101 1,443,343
Total collection of earner levy 1,546,101 1,443,343
Other revenue
Child support 459,309 (254,635) 204,674
1
This restated number is part of the Impairment of debt and debt write-offs figure in the Schedule of Non-departmental Expenditure
and is also shown in the Statement of Non-departmental Appropriations in part 7, Measuring our performance.
Opinion
In our opinion:
the financial statements of the Department:
present fairly, in all material respects:
its financial position as at 30June 2015; and
its financial performance and cash flows for the year ended on that date;
comply with generally accepted accounting practice in NewZealand and have been prepared in accordance with Public Benefit
Entity Reporting Standards.
the performance information of the Department:
presents fairly, in all material respects, for the year ended 30June 2015:
what has been achieved with the appropriation; and
the actual expenses or capital expenditure incurred compared with the appropriated or forecast expenses or capital
expenditure;
complies with generally accepted accounting practice in NewZealand.
the statements of expenses and capital expenditure of the Department on pages 89 to 92 are presented fairly, in all material respects,
in accordance with the requirements of section 45A of the Public Finance Act 1989.
the schedules of non-departmental activities which are managed by the Department on behalf of the Crown on pages 126 to 144
present fairly, in all material respects, in accordance with the Treasury Instructions:
the assets, liabilities, contingent liabilities and assets, commitments, expenditure, revenue, and movements between departments
for the year ended 30June 2015; and
the schedule of trust monies for the year ended 30June 2015.
Basis of opinion
We carried out our audit in accordance with the Auditor-Generals Auditing Standards, which incorporate the International
Standards on Auditing (NewZealand). Those standards require that we comply with ethical requirements and plan and carry out
our audit to obtain reasonable assurance about whether the information we audited is free from material misstatement.
Material misstatements are differences or omissions of amounts and disclosures that, in our judgement, are likely to influence
readers overall understanding of the information we audited. If we had found material misstatements that were not corrected, we
would have referred to them in our opinion.
An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the information we
audited. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the
information we audited, whether due to fraud or error. In making those risk assessments, we consider internal control relevant
to the Departments preparation of the information we audited in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Departments internal control.
An audit also involves evaluating:
the appropriateness of accounting policies used and whether they have been consistently applied;
the reasonableness of the significant accounting estimates and judgements made by the Chief Executive;
the appropriateness of the reported performance information within the Departments framework for reporting performance;
the adequacy of the disclosures in the information we audited; and
the overall presentation of the information we audited.
We did not examine every transaction, nor do we guarantee complete accuracy of the information we audited. Also, we did not
evaluate the security and controls over the electronic publication of the information we audited.
We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.
Independence
When carrying out the audit, we followed the independence requirements of the Auditor-General, which incorporate the independence
requirements of the External Reporting Board.
Other than the audit, we have no relationship with or interests in the Department.
Ajay Sharma
Audit New Zealand
On behalf of the Auditor-General
Wellington, New Zealand
There is no statistically significant difference at the 95% confidence level between 201314 and 201415 for different customer groups.
Notes
* Collectable debt: debt cases where the assessment value is overdue and collections activity is in progress. This activity includes
instalment arrangements, deduction notices, cases linked to legal actions and other manual or automatic actions.
**Non-Collectable debt: debt cases where the assessed value is pending or in dispute and we are unable to proceed with collection
activity at present. This includes cases:
linked to investigations
linked to objections
In July 2014 an amendment was made to the information sharing agreement allowing us to contact overseas-based student loan
borrowers who are not in default, but whose contact information appears to be out of date. This amendment took effect operationally
from August 2014.
In July 2015, the operation of this information sharing agreement was reviewed. It assessed the adequacy of controls in place and in
particular, to ensure compliance with section 11 of the most current Approved Information Sharing Agreement (AISA). The review
confirmed that we are operating in accordance with the terms and conditions of the AISA and the Memorandum of Understanding (MOU).
A copy of the AISA is available to view on our website.
1
Approximate annual incidental administrative charge.
2
We have made attempts to contact 10,724 matched individuals, 3,712 have passed our three point identity verification process.
3
Individual no longer has payments overdue or has a payment arrangement with us.
Number of requests for information made by New Zealand Police to Inland Revenue 93
Number of responses with information provided by Inland Revenue to New Zealand Police 93
Number of occasions Inland Revenue proactively provided information to New Zealand Police 1
COSTS
The sharing agreement with New Zealand Police cost an estimated $3,658 since it started in November 2014 until 30 June 2015.
An additional one off cost of $5,444 in the year ended 30 June 2015, which was the cost to set up the systems and processes so we could
share information with New Zealand Police.
BENEFITS
Under the agreement we need to report if the information provided by Inland Revenue has been used in a case with a resolution of:
No offence
Prosecution
Warning
Diversion
Youth case action
We are unable to provide a breakdown of the number of times information has resulted in the above as prosecutions are currently before
the courts and yet to be decided. Some investigations have not been completed and charges are yet to be laid.
Of the 93 responses provided by Inland Revenue to New Zealand Police, 19 cases or prosecutions are currently being pursued. These
prosecutions include a total of 112 charges. Around 21% of requests for information and responses have resulted in prosecution action to date.
Warning, diversion and youth case action do not apply as the AISA focuses on serious offending and these possible resolutions are for
lower level offending which fall below the serious crime threshold.
New Zealand Police indicated 100% of the information provided by Inland Revenue is used in their investigations although this
information does not always result in a prosecution. Where Inland Revenue proactively provided information to New Zealand Police it
was for an investigation.
ASSURANCE
Under the agreement we are required to report if an audit or other assurance process has been undertaken during the year.
There has been no external audit of the referral process or referrals made during this period. Internally, all requests for information
received from New Zealand Police are subject to review by our Senior Solicitor Legal Technical Services. All 93 requests were reviewed by
our Legal Technical Services since the agreement began in November 2014. There were no issues identified in proposed responses.
AMENDMENTS
Under the agreement we need to report details of any amendments made to the agreement since the Order in Council came into force.
The original agreement was amended on 16 March 2015 to clarify that Inland Revenue may share with New Zealand Police both current
and previous personal information held, and added that information about liabilities can be shared.
The amendment also permits that, in addition to using SEEMail to share personal information, Inland Revenue may share personal
information with New Zealand Police by other means, for example by permitting New Zealand Police to physically access Inland Revenue
premises to examine, copy and/or remove personal information and reasonable steps will be taken by the parties to maintain security
during this process.
PRIVACY BREACHES
Inland Revenue processes more than 25 million transactions and pieces of correspondence every year. When dealing with that volume
and level of information, occasionally mistakes will occur. Of the breaches identified for the 201415 year no individual was harmed by
the incident.
We take privacy very seriously and reporting incidents that may amount to a privacy breach are encouraged. This has resulted in
reporting incidents that do not involve personal information, but are still important to be aware of. Inland Revenue recognises the
importance of protecting information and reporting incidents identifies where processes can be strengthened or more awareness is
required.
In the 201415 financial year 323 incidents were reported to our Incident Management team and of those a potential 223 incidents
involved personal information. This compares to 287 in 201314. The remainder either involved entity information or were not
considered a breach at all. For example generic forms being sent to the wrong address so no personal information was involved.
Further analysis of the incidents found that 214 were actual privacy breaches where personal information was inadvertently disclosed, or
an address was not accurate. This is compared to 241 for 201314. Sending information to the wrong address including postal, email or
fax accounted for 35% of incidents. These are logged as a privacy breach as they indicate address information is not accurate, although do
not necessarily also result in information being disclosed. Of the incidents, 43% involved the disclosure of information.
Only eight per cent of breaches were considered to be potentially significant in that more than 10 individuals were affected or the
information disclosed was considered to be sensitive. However, none of the breaches recorded resulted in harm or adverse consequences
to any individual.
The main cause of breaches is through staff error when manually handling correspondence. Each incident is investigated and we look at
how to reduce staff errors by a continuous improvement focus which includes reviewing handling processes, educating staff and regular
performance reporting.
Certificates for resident withholding tax on interest were detached from a return and 49
sent to the incorrect person
KiwiSaver information was sent to the wrong provider 71
Two incidents when tax agent email addresses were visible (rather than being blind carbon copied) 110
Mail merge email system failure resulted in incorrect information being sent to the wrong customers 132
(1)
Other area includes storage and atrium area.
(2)
201415 leased area includes 5,237m2 subleased to other parties in 110 Featherston Street.
Notes:
Results quoted here are based on total space used by Inland Revenue (excluding co-located space), including front of house, and counts each
employee, including part-timers and registered contractors, as one person (headcount). This aligns with the methodology PMCoE will be
using in the future.
Results for previous years are re-stated using the same methodology.
Average space per person differs from that quoted on page 50 and reported to the PMCoE as those results exclude front of house space and
include the space occupied by our co-location partners and their people.