Analysis
Results of Inland Revenue binding rulings survey
Tax Alert - February 2018
Virag Singh and Jeremy Beckham
Every year Inland Revenue seeks feedback from different customer groups on how the binding rulings regime is performing. Last year, Deloitte submitted a request for information under the Official Information Act (OIA) for the full results of the 2017 survey. Inland Revenue has now made these results available.
The 2017 questionnaire was emailed to a representative of Chartered Accountants Australia and New Zealand, the Tax Panel of the New Zealand Law Society and The Corporate Taxpayers Group. These professional tax bodies then circulated it to their respective members. However, only 6 responses to the questionnaire were received.
Helpfully, because of the limited level of response to the 2017 survey, Inland Revenue decided to also make available the full results of its 2016 survey. The 2016 questionnaire was circulated to 48 tax professionals who regularly use Inland Revenue’s binding rulings service. 29 responses to the 2016 questionnaire were received.
The full results from the May 2016 and July 2017 surveys are as follows:
Tax Alert February 2018
2016 / 2017 survey results
Questions asked |
Not applicable |
Not useful |
Slightly useful |
Useful |
Very useful |
If you have had pre-lodgement meetings, how useful were they? |
3.4% / 17% |
6.9% / 0% |
6.9% / 0% |
34.5% / 50% |
48.3% / 33% |
Have our rulings been useful in clarifying tax positions for you or your clients? |
0% / 0% |
0% / 0% |
10.3% / 0% |
37.9% / 50% |
51.7% / 50% |
|
Not applicable |
No |
Sometimes |
Most of the time |
Always |
In your experience, have the timeframes for providing rulings been reasonable? |
0% / 17% |
0% / 0% |
0% / 0% |
62.1% / 33% |
37.9% / 50% |
Did the rulings you received in the last year provide value for money given the issues considered and arrangements entered into? |
0% / 17% |
3.4% / 0% |
10.3% / 0% |
51.7% / 33% |
34.5% / 50% |
|
Not applicable |
Not satisfied |
Slightly satisfied |
Satisfied |
Very Satisfied |
For the staff working on ruling applications, how satisfied were you with: their competence? their professionalism? |
0% / 17% 0% / 17% |
7% / 0% 0% / 0% |
0% / 0% 0% / 0% |
31% / 50% 34% / 50% |
62% / 33% 66% / 33% |
When we communicated our reasons for decisions (for example, in a contrary view letter) were you satisfied that the reason was: comprehensive clearly explained
|
14% / 50% 14% / 50% |
0% / 0% 0% / 0% |
10% / 0% 3% / 17% |
52% / 33% 59% / 33% |
24% / 17% 24% / 0% |
Overall, how satisfied were you with the operation of the rulings regime and the service provided? |
0% / 17% |
0% / 0% |
3.4% / 0% |
44.8% / 33% |
51.7% / 50% |
The results indicate that users of the rulings regime are generally satisfied with the way that the service is currently being delivered. What we found more interesting were some of the optional comments that were made in the survey responses. For example:
- There are mixed opinions regarding the usefulness of pre-lodgement meetings. Where the arrangement has complex or unusual facts, then the meeting is seen as a useful way of ensuring Inland Revenue fully understands the commercial drivers behind the arrangement or structure. A few respondents did identify that pre-lodgement meetings are of limited value where the attendees from Inland Revenue are not the same personnel that will be involved in the ruling process.
- There are often delays when a factual review is requested as part of the binding ruling application. This can be a problem for some taxpayers where the factual review is considered to be integral to the ruling application.
- The competency and professionalism of the Taxpayer Rulings Unit within the Office of the Chief Tax Counsel (OCTC) is seen as excellent. However, when ruling applications are delegated to the Service Delivery group, the experience is not always as good and an “investigations mentality” is sometimes encountered.
- There has been a lot of improvement in terms of time frames for binding rulings in recent years, including good communication from Inland Revenue and an effort to meet urgent deadlines where possible. Notwithstanding, respondents have expressed interest in a “fast track” process if needed to accommodate commercial timeframes (even if this comes at a price premium).
- Binding rulings are normally viewed as a way to manage tax risk (i.e. obtaining certainty of an expected tax outcome) rather than to address an ambiguous tax issue. This is largely because of the time and costs involved in the process.
- There are varying levels of competence across Inland Revenue staff, which can impact on service. The cost can also sometimes be prohibitive (especially for SMEs).
- Officials at Inland Revenue are perceived to be taking an inconsistent approach as to the Commissioner’s ability to make private rulings on certain matters, with some officials adopting a very narrow interpretation of the Commissioner’s power in this regard.
Overall, Inland Revenue should be commended on these results. However, there are always areas where improvements can be made (as the above comments suggest). The number of responses to the 2017 and 2016 surveys is also relatively small. This suggests that Inland Revenue’s binding rulings function is a useful but quite likely inaccessible service for many taxpayers given the cost and timing constraints.
We would expect Inland Revenue to take heed of these responses and continue to look for ways to refine its service delivery going forward. It is to be noted that the government issued a discussion document on modernising the Tax Administration Act in which it has proposed changes to the binding rulings regime, which would address some of the concerns/issues raised in the surveys. The proposed changes were discussed in our July 2017 Tax Alert article.
For more information, or if you are considering making a binding ruling application to get certainty on your tax position, please contact your usual Deloitte advisor.
