16th June 2017 

Inland Revenue’s (IR) restructuring could have implications for audits, enquiries, investigations and reviews in the future. IR announced a year ago plans to cut 1500 employees from its workforce in an attempt to modernise and streamline its own efforts. The period of restructuring has been planned to begin in the months following necessary staff consultations, which have now begun.

The cuts represent up to 30% of the IR workforce, and a more efficient system will need to be in place in order to pick up the slack. While IR maintains that “the proposed new structure is all about bringing Inland Revenue closer to customers,” the Otago Daily Times reports that the new iteration of the IR will be characterised by “less human interaction, clearer and simpler digital services and tax transactions through accounting software.”

In Australia a recent and widely criticised ‘robo-debt’ mishap was as a result of automated processing efforts of Centrelink, a government department, and the Australian Taxation Office (ATO). Once Centrelink declarations were matched with tax returns, more than 20,000 letters were sent to individuals with perceived discrepancies in relation to their government benefits declarations. At least 20 per cent of the letter recipients were later found to owe nothing. Whilst the issued correspondence was questionable, the onus rested on individuals to allocate time and resources to clear any perceived wrong doing. Alas, the recent robo-debt saga has not diminished the ATO’s plans to charge full steam ahead in targeting taxpayers. When it comes to automated data matching, it appears that the ATO will pursue utilising these capabilities, and would likely focus on a broader range of taxpayers in the future. IR’s technological advancements appear to be heading down the same path of automation, thus IR could anticipate similar results should measures not be put in place.

IR will certainly face a challenge under its forthcoming system as it will need to deal with thousands of discrepancies within tax statements each year – some of them innocent, some not. Similar to Australia’s robo-debt saga, the onus remains on taxpayers, and their accountants in some circumstances, to correct the perceived discrepancy.

For more information on audit activity occurring in New Zealand contact the Accountancy Insurance team on 0800 001 299.