TMNZ

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The latest annual Inland Revenue satisfaction survey by Tax Management New Zealand and Chartered Accountants Australia and New Zealand reveals New Zealand accountants are generally happy with the service they receive from IR – but some frustrations still exist.

NZ accountants expect new tax policy measures to add to compliance burden

BROUGHT TO YOU BY TMNZ

Accountants in New Zealand are generally satisfied with the service they receive from Inland Revenue (IR) but are frustrated that it is so difficult to get answers over the phone and declare new IR measures will add significantly to the compliance burden.

Accountants are happy with IR agent account managers and digital channels

Acuity Special Edition December/January 2023

See full issue

Acuity Special Edition December/January 2023

See full issue

Acuity Special Edition December/January 2023

See full issue

The annual Inland Revenue satisfaction survey by Tax Management New Zealand (TMNZ) and Chartered Accountants Australia and New Zealand (CA ANZ) reveals that close to 90% believe service from IR to be helpful, with a little over 85% rating the service as responsive. About the same number of respondents say IR has a good understanding of their issues.

This annual survey started 13 years ago, when dissatisfaction with Inland Revenue was at a peak and things have improved significantly since then, according to John Cuthbertson FCA, NZ tax and financial services leader, CA ANZ.

“Broadly, member satisfaction with Inland Revenue was pretty positive,” he says of the latest survey.

The survey of 500 practitioners reveals accountants are very happy with the service they received from IR agent account managers. In common with prior surveys, agent account managers are the service channel that practitioners rate the highest. Written comments from practitioners indicate strong support for the agent account managers. “They are the jewel in the crown for Inland Revenue in terms of engagement with practitioners,” says Chris Cunniffe, chief executive officer of TMNZ.

Some 80% of respondents gave agents a rating of six out of 10 or higher, while close to three-quarters of practitioners gave the Inland Revenue website the same rating. Newsletters and webinars also rated high.

Public Practice (109)

Non-public Practice (35)

My IR

Agent Account Manager

Phone

Means of contact: Selected choice

Total (144 respondents)

Website

Newsletter

Webinar

48.6%

50.5%

42.9%

65.7%

73.4%

103

71.5%

25.7%

62.4%

53.5%

28.6%

43.1%

39.6%

14.3%

27.5%

24.3%

11%

25%

0.7%

2.9%

29.4%

Other

However, they were far less happy with the service they received on the phone, with only 40% of respondents giving the service a rating of six or more.

Inland Revenue has been wanting practitioners to self-serve and the survey indicates practitioners are embracing the My IR channel. However, CA ANZ members also need quick over-the-phone answers to questions when something’s not working or it’s taking too long, says Cuthbertson. It’s important that staff answering the phones have enough training and can answer the questions.

“It's really important that Inland Revenue appreciate that the phone system is an option that has to be there as just one of the suite of options,” Cuthbertson says.

One respondent to the survey wrote: “We are finding it very frustrating that the call centre staff that talk to our clients do not know enough about matters and give incorrect advice, some with significant impact.”

Usage versus experience rating of different forms of contact

Agent account managers are often utlised and provide good service, but there are improvements needed in the quality of the phone service within Inland Revenue.

4.0

4.5

5.0

5.5

5.0

6.0

6.5

7.0

7.5

8.0

Users

Average experience rating

10%

20%

30%

40%

50%

60%

70%

80%

Phone

Webinar

Newsletter

Website

Agent Account Manager

My IR

The survey revealed a strong take-up of digital channels, with close to 80% of agents having used it.

COVID-19 response

Instalment arrangements were used slightly less although agents who did make use of the provision said there was greater efficiency in being able to enter an instalment arrangement, perhaps because of a greater take up of online channels. Less well known were the IR’s determinations on tax matters relating to COVID where the commissioner had the power to vary timeframes for filing documents and making payments. There was good awareness of the tax pooling determination, which allowed additional time for payment of arrangements and is effectively an extension of the other concessions around payment deferral that the commissioner granted.

With 2021 being another year impacted by the COVID-19 pandemic, members were asked about their use of COVID support measures for their clients. The survey revealed that the COVID-19 Support Payment, the Resurgence Support Payment and the Small Business Cashflow Loan were widely used, and were rated extremely useful by practitioners.

However, the tax pooling determination, which allowed additional time for payment of arrangements and is effectively an extension of the other concessions around payment deferral that the commissioner granted, was well known.

66 Very useful

26.2%

COVID-19 support payment (Public Practice)

159 Extremely useful

63.1%

16 Moderately useful

6.3%

8 Slightly useful

3.2%

2 Not at all useful

0.8%

1 Don't know

0.4%

Changes to property tax

Practitioners were also asked about how much changes to property taxation rules and disclosure rules for trusts will add to compliance costs.

Some 86% of practitioners say they expected a significant or somewhat significant impact on costs as a result of the bright-line property rule, which relates to the taxing of capital gains on the sale of investment property held for less than a decade. Cunniffe says this came as “no surprise”.

“CA ANZ has been talking about that all the way through, that this is an incredibly complicated regime, arguably not to solve a tax problem, and the burden of it is going to be borne by the taxpayers,” says Cunniffe. “For mum and dad investors with just a few investment properties, who don't necessarily have to use a tax agent right now, it will be a challenge for them to DIY their tax position under the new rules,” he says.

Changes to the bright-line test and rules for the deduction of interest on loans used to purchase residential property

New financial reporting and disclosure rules for trusts

86%

92%

of respondents said these changes will increase compliance costs

Significantly

Somewhat significantly

Nether insignificantly or significantly

Insignificantly

64%

Extent of increase

16%

Average proportion of respondents trusts increasing by each cost band

35%

46%

14%

$0-$500

$500-$1000

$1000-$2000

$2000-$4000

$4000-$8000

$8000 and above

0.2%

Trusting disclosure rules for trusts

Says Cuthbertson: “This year the key things we wanted to look at and engage with members on was around the additional bright-line changes, the introduction of the interest limitation rules and the additional disclosure burden for the first time for trust disclosures.”

“I'd sum that up as we're basically setting both our members and clients up to fail as a result of these changes in the way that they've rolled out,” says Cunniffe.

Accountants were also concerned about the lack of certainty while the proposed rules progressed into law. The final legislation took over a year to produce and wasn’t ready until March 2022, which was a long time for practitioners to be advising clients about how to react without enough information, Cuthbertson says. About three out of 10 respondents say they didn’t receive enough guidance on this between October 2021 and April 2022.

On trusts, new reporting and disclosure rules will add up to NZ$1000 to the compliance costs for 80% of practitioners’ clients, but this will add up to a NZ$100 million to NZ$135 million impact on the economy. CA ANZ has previously argued in submissions that the rules are a significant over-reach in terms of the obligations being put on smaller trusts, that are not really the target segment where significant income is potentially sheltered from the new top personal tax rate.

Public Practice (259)

Non-public Practice (230)

Total (489 respondents)

49.1%

96.9%

18.3%

1.2%

9.2%

Yes

N/A

74.4%

32.6%

1.9%

16.4%

251

113

364

Respondents were clear that most of the problems in this area are the result of the political decision to collect this information. Respondents noted that Inland Revenue had recommended against this policy, so the discontent was directed at the government, not Inland Revenue who has to administer the information collection. In terms of the delivery of the trust disclosure rules, about a third of respondents say they hadn’t received sufficient guidance on the rules between December 2021 and September 2022. “Our members were not shy about sharing some views there,” says Cunniffe.

One respondent wrote, “I feel like the focus of many of the changes is chasing dollars and cents and not creating significant change like they are trying to sell it as. It just feels like a fishing expedition and penalising mum and dad business owners and investors.”

Cuthbertson says there are new disclosure and compliance obligations for taxpayers being added without the government considering the cumulative compliance burden and cost.

Next steps

CA ANZ shares the survey results with Inland Revenue and the minister of revenue David Parker, and typically receives good engagement. The survey provides CA ANZ with the credibility and a solid factual background to discuss concerns about the operation of the tax system with IR.

Watch

In September 2022, 500 New Zealand members of Chartered Accountants Australia and New Zealand (and 74 non-members) took part in the annual TMNZ and CA ANZ Inland Revenue Satisfaction Survey 2022. Here, TMNZ chief executive Chris Cunniffe FCA and CA ANZ NZ tax and financial services leader John Cuthbertson FCA discuss the results.

Awareness of requirements for trusts

Member sentiment – verbatim comments

Poor service and responsiveness

“Response times and knowledge of IR staff in general is very poor.”

“IR staff do not understand tax legislation we are forever going back to them on basic tax rules. They need to increase their learnings on basic tax legislation before they comment on tax assessments incorrectly.”

“Getting in touch with a query is diabolical – you can’t call and the written question process takes 15 days. There has to be a way to get clarification on issues more promptly”

“It is extremely difficult to get hold of IR – impossible by phone and so only means seems to be via MyIR message and there is often a 2 weeks delay in responding. This makes it difficult for companies seeking answers with deadlines looming. IRD really needs to address this.”

“The tax system is steadily becoming more complex which is increasing compliance costs and is encouraging changes in structures and behaviour to get the best possible outcome. Certainly a backwards step.”

“There seems to be too many changes all at once and it is hard to keep up.”

“Keeping the regulatory environment simple and easy to understand assists with compliance.”

Complexity

“Would be more helpful to receive information from IR regarding the new trust information & the new rental rules before returns were filed for the 2022 year. It is no use still putting out info + webinars after the start of the new income year when some returns will already have been filed.”

Communication issues

Most common

Least common

Would a global recession be on the cards if countries talked to each other more?

CA ANZ shares the survey results with the IRD and the minister of revenue David Parker, and typically receives good engagement. The survey provides CA ANZ with the credibility and a solid factual background to discuss concerns about the operation of the tax system with the IRD.

“Response times and knowledge of IRD staff in general is very poor”

“IRD staff do not understand tax legislation we are forever going back to them on basic tax rules. They need to increase their learnings on basic tax legislation before they comment on tax assessments incorrectly.”

“Getting in touch with a query is diabolical – you can’t call and the written question process takes 15 days. There has to be a way to get clarification on issues more promptly”

“Response times and knowledge of IRD staff in general is very poor”

“There seems to be too many changes all at once and it is hard to keep up”

With 2021 being another year impacted by the COVID-19 pandemic, members were asked about their use of COVID support measures for their clients. The survey reveals the COVID-19 Support Payment, the Resurgence Support Payment and the Small Business Cashflow Loan were widely used, and were rated extremely useful by practitioners.

“Many mum and dad investors with just a few investment properties, who don't necessarily have to use a tax agent right now, I challenge them to DIY their tax position under the new rules.”

About a third of respondents say they hadn’t received sufficient guidance on the new trust disclosure rules between December 2021 and September 2022.

“At the moment Inland Revenue are requesting or requiring that trusts prepare a full-blown set of financial accounts under tax principles, whereas in reality they don't want you to file those. So that's going down badly,” he says.

Adds Cunniffe: “And you roll that out across the numbers of trusts that are impacted and we've got a massive deadweight cost on the economy, at a time that you'd argue is we just can't afford to take that suboptimal impact.”

Cuthbertson says there are new disclosure and compliance obligations for taxpayers being added without the government considering the cumulative compliance burden and cost.

Communication issues

“Agents are talking about many of the COVID support measures as high usage and high value,” says Cunniffe.

“Our members were not shy about sharing some views there,” says Cunniffe.

Agents are talking about many of the COVID support measures as high usage and high value,” says Cunniffe.