Buisiness Transformation - Taxation software update

Buisiness Transformation - Taxation software update

Business Transformation – Transitioning from “FIRST” through “Fast” to “START”

Inland Revenue has been implementing “business transformation”, using software program intended to modernise New Zealand’s tax service, in theory making the administration of our tax system simpler and more efficient.  An integral part of the program involves using American supplier Fast Enterprises (Fast), to develop a new software platform that progressively replaces the existing FIRST system.  The introduction of a software solution that simplifies the tax administration and provides flexible, efficient service is welcome.  "Fast will supply a fully integrated tax solution, rather than building a system from the ground up," reported Inland Revenue's Deputy Commissioner Change, Greg James on 8 June 2015.

However, as with many technological developments, it is inevitable that during the transitional period there will be some hiccups, bumps, and unexpected issues that arise.  Hence the release of the Supplementary Order Paper (SOP) No. 190 on Tuesday, 16th August 2016, proposing an amendment to the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill.  This amendment allows “transitional regulations and administrative exemptions to be made during Inland Revenue’s business transformation process.” 

What does the amendment do?

In essence, the insertion of the new s 227B to the Tax Administration Act 1994, allows the Governor General to make regulations to resolve transitional issues that arise during the co-existence of the two software platforms while Inland Revenue moves from FIRST to START.

The proposed amendment in summary:

  • Allows the Governor General (on the recommendation of the Minister of Revenue) to make regulations that prescribe how both the new and old provisions apply in order to ensure continuity of the administration of the tax system;
  • Specifies that the Minister of Revenue may only recommend a regulation be made if it has been the subject of a consultative process;
  • Requires that regulations made under this section must be repealed within three years from the date they are made;
  • States that the new section itself and any unexpired regulations will be repealed on 31 December 2021.

Risks

  • When shortcutting the usual processes for implementing regulations, there is the inherent risk that unfair advantage could be taken of taxpayers with regulations being fired though without full consideration being given to the implications for taxpayers. Potentially, this amendment is purely simplifying processes for Inland Revenue with tax payers themselves being served the “thin end of the wedge” without the ability to comment (or prevent) speedily implemented changes.
  • While it has been specified that the Governor General can only make regulations if they have been subject to a “consultative process”, there is no specification on what sort of consultation and how much consideration must be given to any consultation. Whether a fair or thorough consultation process is in fact implemented remains to be seen.

 

Benefits

  • Having the power to make the necessary amendments to smooth out the transitional period is certainly practical and arguably necessary.  Tax issues can be complicated and time consuming enough without the administration of the system itself making things even more difficult.
  • The requirement for the repeal of regulations made under the provision and for the repeal of the provision itself provides a safety net.  So any regulations implemented are temporary and, with the intent of smoothing the transitional process itself, theoretically should not have any significant long term implications.

Conclusion

We look forward to the full implementation of Inland Revenue’s new software platform and hope that it leads to the desired effect of more efficient tax administration.  With the inevitable bumps, let’s see if bestowing the Governor General with the power to implement regulations during the transitional period has the desired effect of smoothing the way to a new efficient Fast START system.

Posted: Monday 22 August 2016