IRD boss Graeme Holland decided to devote his life to tax collecting tax while just a fifteen-year old at Cranley College, England. “There was something about Inland Revenue that appealed. I thought it was the centre of government. I thought if you didn’t have it, you couldn’t do health and schooling. It seemed the core”.

The young Graeme Holland achieved his vocational goal when he started at New Zealand’s IRD in 1963.  He was just seventeen years old.

This week Mr Holland told the Select Committee Inquiry into IRD’s operation and culture that, “Fundamentally our job is about compliance and enforcement and is at the hard end of government services”.

His statement appears a lifetime away from the public school boy view that taking wealth is “core” rather than creating it.

“I lead a large and dynamic organisation which has one of the more difficult government tasks - the collection of money from sometimes reluctant taxpayers, or from people who do not necessarily link their payment with an associated personal gain or benefit”.

(Parenthetically, I should note that taxpayers Dave Henderson, Bill Duncan, Ron Denby, and too many others, haven’t found the task none too easy either.)

There’s also a lifetime’s shift in the government’s position.  Sir William Birch has announced a major backdown on the penalties regime and IRD’s get-tough policy on struggling taxpayers.

Sir William has conceded that the two-percent a month penalty is too tough.  It will be halved.  This is good news.  The interest rate charge will remain.  Tax debts will double in 32 months instead of 22 months.  This is something.

The other change is to extend the serious hardship, financial difficulty and instalment arrangement provisions to all tax types.  Taxpayers paying tax debts off by instalment will also get better certainty so that a part failure won’t produce what Sir William calls a “disproportionate penalty”.  This is all good news for achieving a more rationale and humane tax system.

It is also shows the nonsense of the Commissioner’s multiple positions on instalment arrangements.  The reality is that the IRD have been on shaky legal ground doing deals for taxes other than income tax.  The policy has been inconsistent and has depended on what office a taxpayer has gone to and what officer the taxpayer has run up against.

The IRD have a statutory duty to treat taxpayers fairly and have been failing that duty by applying inconsistent policy for instalment arrangements.  There have been no clear rules or guidelines.

For example, the Commissioner has had to admit that the time given to pay off a debt “may vary between Inland Revenue offices depending on local initiatives”.

IRD internal newsletters make the point more bluntly.  There are those officers who employ the “whatever blows you hair back” approach to debt collection.  The problem has been there for years and it is only the Select Committee Inquiry that has begun to get it addressed.

The government and IRD’s backdown on penalties, instalment arrangements and hardship provisions is a good start.  But it is not near enough.

There are the bigger issues of the burden of proof, the right to see your own tax files, the duties to be placed upon tax officers, the rights of taxpayers and the mechanism for their enforcement.

The IRD’s report to the Select Committee on its powers and their use (and abuse) is predictable and chilling: “In reviewing the legislative powers of the Inland Revenue, and the exercise of those powers, the Committee should be mindful of the fact that the revenue which the Government needs to fund its expenditure comes mainly from taxation collection by the Inland Revenue”.  In other words, remember the law is stacked up against the taxpayer so that we can raise the cash you politicians like to spend.

“It is important for the Committee to recognise that and ‘softness’ exhibited by the Inland Revenue will almost certainly result in a reduction in tax collected”.   In other words, you mightn’t like our methods, but what programme do you propose to cut to cover the cost of giving taxpayers a fair go?

The Commissioner goes on, “The powers that exist in our tax laws are an essential feature of a taxation system and many of the criticisms of them completely fail to understand how a tax system works in practice”.  The problem is that those complaining understand all too well how our tax system works.  The two principles driving it are simple enough: “you owe what we say you owe” and “pay up or we’ll destroy you”.

That’s precisely the tax system’s operation and practice that is having such a savage effect on businesses and personal lives.  The taxpayers’ being pummelled understand far better how the tax system operates than does the Commissioner.  He still denies the problems.

The Commissioner rejects complaints of IRD harassment.  He rejects them without investigation.  He says he doesn’t need to investigate them because it’s not in IRD’s culture to harass taxpayers.  The guy’s out of touch.  There’s the other issue: the top tier of the IRD must be cleared out.

ENDS