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The digital world and tax

By February 13, 2022 No Comments

The digital world and tax

Not surprising with a couple of short weeks and a whole lot of other ‘stuff’ going on presently, it’s been relatively quiet on the tax front. The only release of note (and some may argue that view) being IR’s officials’ issue paper seeking your feedback on digitising the tax system.

Titled ‘Tax administration in a digital world’, the paper explores IR’s potential role in a world where more businesses are operating in a digital environment, using software to run their business, particularly to manage their financial record keeping, invoicing and calculation of tax obligations. These businesses are spending less time on the more routine aspects of accounting and tax, and are freed up to focus more on running their business. The shift of business management into digital channels means tax calculations can be embedded in the software businesses use. This is referred to as tax occurring in the business’s natural systems.

You should all be aware of IR’s business transformation program (unless you had your head in the sand during a number of their major software updates when all systems were unavailable for nearly a week), and how the changes made have strengthened its ability to deliver services based on core information, involving collection and payment of money and processing at scale. More tailored services, which increasingly the public expects in the digital environment, are likely to come from private sector entities. For example, integrating financial management with tax management for a small business or providing budgeting assistance for someone with debt. Digital channels provide the opportunity for private sector entities to deliver customised services that can more effectively and efficiently meet taxpayers’ needs. The impact of these developments is that for these taxpayers IR will act more as an enabler and the customer-facing parts of tax compliance would be delivered by private sector entities.

The issues paper is only 25 pages in length, containing six chapters with the third of these likely to interest the majority, where IR sets out its views on what the future could look like with a more digital tax system, what IR’s role could be, and what implications could be faced by taxpayers.

If you would like to have your say, submissions are requested to be forwarded no later than 31st March 2022.

This article from the ‘A Week in Review’ newsletter was originally published Monday 14th February 2022. If you have any questions or would like a second opinion on any national or international tax issues, please contact me richard@gilshep.co.nz. 

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