Why New Zealand's tax policy is gold standard

 At a glance

New Zealand’s Generic Tax Policy Process (GTPP) has been in place since 1994 and is well regarded for its focus on consultation through public engagement.

Under the GTPP, the development of tax policies follows a five-stage system: strategic, tactical, operational, legislative and implementation/review.

Public engagement is encouraged at each stage, with the goal of early and frequent consultation, as well as improved transparency and accountability.

“The purpose of interacting with the public is to improve customer, policy and regulatory outcomes, and to inform stakeholders in advance of regulatory changes,” the IRD says. 

“Submitters will often have better access to information on the size and nature of the problem and how the issues can best be solved. 

“Consultation can also enhance voluntary compliance, because it allows interested parties more time to understand why there is a need to change, and more time to adjust to changes.” 

In the third – operational – phase, formal detailed consultation currently takes place during detailed policy design.  

“During the submission period, officials have intensive face-to-face meetings with affected taxpayers.” 

Is the GTPP working?

There’s been strong support for the GTPP over time from other countries, including Australia, although a similar system is yet to be adopted elsewhere.

However, Adrian Sawyer FCPA, professor of taxation at the University of Canterbury Business School and member of CPA Australia's New Zealand Tax Committee, highlights a major issue with the GTPP – using the framework isn’t enshrined in New Zealand legislation. 

Sawyer points out that there have been numerous recent changes made to New Zealand tax laws, particularly in relation to COVID-19, without any public consultation. 

“Setting aside [GTPP] can be done with relative ease with no apparent direct consequences. 

"The purpose of interacting with the public is to improve customer, policy and regulatory outcomes and to inform stakeholders in advance of regulatory changes."

— Inland Revenue Department

“A consequence of the GTPP is that it increases the time it takes to develop and implement tax and social policy,” the IRD says. 

REF: CPA