Individual Income Tax Reform in China: Reflections on New Zealand’s Experience

Abstract

New Zealand (NZ) has taken a path towards tax simplification with
respect to individual taxpayers who are not involved in business or self-employed,
since the mid-1980s, following the election of the Fourth Labour Government in
1984. The governing principle has been to enhance efficiency and reduce
complexity from the perspective of the NZ Government and Inland Revenue, while
placing less weight on potential equity issues. This has seen the removal of
deductions for wage and salary earners, the removal of the need to file returns
(accompanied by personal tax summaries) for those with income taxed at source,
and formalising self-assessment. For individuals who are in business or selfemployed, the drive more recently has been to reduce their compliance costs
following significant tax reform since 1984, while retaining their ability to claim
deductions. This differential approach has placed greater emphasis on the
employee versus self-employed distinction. Going forward, Inland Revenue, in
conjunction with the NZ Government, is embarking on the largest IT-focussed
project in NZ’s history – the Business Transformation Programme – that is
intended to take tax administration well into the 21st Century. Further
simplification, greater withholding accuracy, and an online environment as the
primary interface between Inland Revenue and taxpayers, are key themes. Thus
like the Peoples Republic of China (PRC), NZ is undertaking significant reform of
the way individuals will engage with, and meet, their tax obligations.