Eternal vigilance of a low-key enforcer

David Butler

David Butler
* Age: 55.
* Married for 26 years
* Two sons, students at Victoria University.
* Trained in law and accounting, he became Commissioner of Inland Revenue in February 2001 after a 25-year tax career in Australia, where he was responsible for leading the implementation of extensive business tax reforms.
* Hobbies: Skiing, gardening, golf most weekends and lots of walking.


The tax gatherer's role is an ancient but unloved one. In person, however, the Commissioner of Inland Revenue, David Butler, is all mild-mannered amiability - even with a painful back, injured while visiting his father in Australia.

Before he became New Zealand's top tax man in 2001, he was deputy commissioner at the Australian Taxation Office and his knowledge of this country was confined mainly to its ski fields. He has recently begun a second five-year term as commissioner.

As a chief executive, Butler runs one of the largest organisations in the country, with about 5000 staff and a budget of half-a-billion dollars.

The tax affairs of six million taxpayers (including companies and trusts as well as individuals) involve processing about eight million forms and six million phone calls a year.

And the Government keeps coming up with new things for the Inland Revenue Department to do.

Being the collecting point and record-keeper for KiwiSaver from next April will come on top of roles in the Working for Families family assistance programme, student loans, child support, paid parental leave and ACC levies.

No problem, says Butler, and par for the course for tax authorities these days.

"Most developed countries now have the tax system and the welfare system pretty much interlinked," he said. "If you think about child support, it is pretty much about assessing payments and collecting them, which is what you do for tax. And for Working for Families - if someone is working we have all the information about their income levels and the number of dependants, so it makes sense for us to do those things."

Under the new KiwiSaver workplace savings regime, money will flow in the first instance from employers to the IRD and then to the preferred fund managers. It will also require meticulous record-keeping.

But Butler says these are systems other tax authorities have already had to develop and perfect so there is a lot to learn from the rest of the world.

"The timelines are tight, absolutely, but we have got good project management disciplines and we are confident we will deliver when we have to.

"Every year, we deliver $30 million to $40 million worth of information-technology projects arising from law changes of some sort, or from things we are doing to improve our business - all of them on time and to specification. We just switch all of that on to KiwiSaver or Working for Families or whatever."

Nor does this burgeoning portfolio of functions mean IRD frontline staff in call centres all have to get their heads around more and more things.

Training is progressive and performance monitored. Call centre staff are accredited for student loan inquiries or family assistance inquiries or whatever.

"Decision support tools" on the system prompt staff all the way through on what questions to ask and there is a help desk if it gets too complex.

"Ninety-nine times out of 100 you will get the right answer."

But if you are the 100th person and get the wrong answer it is, basically, just tough. If you owe the tax, you have to pay.

"The advice we give is technically not binding on us. We say 99 times out of 100 because we're human and mistakes get made."

In his first terms as commissioner, Butler introduced a charter aimed at lifting the department's performance in dealing with the public and its image - basic things such as admitting it was wrong if it was wrong, apologising, fixing it and trying to ensure it did not happen again.

Butler said surveys suggested staff morale was good.

The turnover rate of 10 per cent was not bad for the public service. And even in a tight labour market it did not have trouble filling jobs in its call centres. "We are seen as a good employer, I believe," he said.

"When it comes to the high-level technical and legal specialists, we have a bit more difficulty because we can't compete on salary. We have fantastic people though.

"What we offer is challenging and interesting work in those areas, but we can't offer the sort of salary they would command in the private sector.

"But we are quite lucky that, with a lot of larger businesses looking to move out of Wellington, we have picked up some really good people who want to stay in Wellington."

Structurally, the tax system was sound, Butler said - by which he meant one that was easy to comply with but hard to avoid.

"That is what the McLeod review found in in 2001. And if you have a structurally sound system you have fewer weaknesses, of course."

He was told by a senior tax professional when he first started as commissioner that he would not see the same sort of evasion and avoidance in New Zealand as he saw in Australia. "And generally I think that's true."

People pushed quite aggressively against the limits of the tax laws.

"But I don't think we have the same cash economy issues they do in Australia, though its hard to quantify of course," he said.

But enforcing the tax laws required eternal vigilance.

"International tax issues are ones we constantly keep a watch on. Business operates globally. We are a tiny economy and we have to make sure that what is due here is paid here."

Butler is confident of being able to enforce controversial planned changes to the tax treatment of directly held overseas shares.

"It's a relatively small number of people - 20,000 is our best estimate, but we don't necessarily know that."

What of the risk that because these are overseas assets and overseas transactions, and a lot of people regard the tax as an unjust, they will take the view that what the ID doesn't know won't hurt it?

"They can take that risk but we have double tax agreements [with other countries]. We have extensive dealings with our colleagues around the world and we have ways of obtaining information."