OUTPUT CLASS 1 POLICY ADVICE OUTPUT DELIVERY TARGETS

OUTPUT CLASS 1 POLICY ADVICE OUTPUT DELIVERY TARGETS Performance Delivery and Measurement Document 2011/12 Page 1 of 16

Output 1.1 Policy Advice in Relation to Tax and Social Policy Performance Measures Quantity 1.1.1 External We will provide the Minister with: Tax and social policy advice as agreed in the Government's tax policy work programme using the Generic Tax Policy Process (details available at http://taxpolicy.ird.govt.nz) Draft tax bills as agreed, and support their introduction and passage through Parliament Budget forecasts and updates Regular reports on progress. Target: Achieved Quality 1.1.2 External Percentage of regulatory impact statements assessed as adequate - advice is complete, convincing, consulted, clear and concise (details available at http://treasury.govt.nz/publications/guidance/regulatory). Target: 100% 1.1.3 External We will ensure that the Minister is satisfied with the quality of: Policy advice Tax legislation and Revenue forecasts. Target: Achieved Performance Delivery and Measurement Document 2011/12 Page 2 of 16

Output 1.2 Ministerial Services Performance Measures Timeliness 1.2.1 External Minimum percentage of ministerial correspondence responded to within 10 days. Target: 95% 1.2.2 External Percentage of parliamentary questions responded to within required timeframes. Target: 100% Performance Delivery and Measurement Document 2011/12 Page 3 of 16

OUTPUT CLASS 1 POLICY ADVICE MEASUREMENT METHODOLOGY Performance Delivery and Measurement Document 2011/12 Page 4 of 16

Output 1.1 Policy Advice in Relation to Tax and Social Policy Quantity 1.1.1 External We will provide the Minister with: Tax and social policy advice as agreed in the Government's tax policy work programme using the Generic Tax Policy Process (details available at http://taxpolicy.ird.govt.nz) Draft tax bills as agreed, and support their introduction and passage through Parliament Budget forecasts and updates Regular reports on progress. Target: Achieved Purpose The purpose of this measure is to ensure that the Minister of Revenue receives robust and timely services that help deliver the Government's tax policy work programme. Services provided include tax and social policy advice, negotiation of double tax agreements, drafting of tax legislation and preparation of budget forecasts and updates. Link to Our Impacts The work of our Policy Advice division is linked to and impacts across the entire tax system. A good tax system 1 where both policy and the administration are working well together helps to create an environment where taxpayers comply with their legal requirements voluntarily, where businesses grow and New Zealand becomes an attractive option to investors. Inland Revenue collects significant amounts of revenue to finance government spending using broad tax bases and we believe that when the tax system is mainly seen as fair, this will encourage taxpayers to register when they should, provide complete and accurate information and take part in social support programmes. 1 Tax system refers to the breadth of Inland Revenue business and includes all types of tax and revenue gathering and social support programmes including income tax, PAYE, GST, family assistance packages, student loan debt collection, KiwiSaver administration and Paid Parental leave distribution. Performance Delivery and Measurement Document 2011/12 Page 5 of 16

Definitions Tax policy work programme The formal document submitted to Cabinet by the Minister of Revenue and Minister of Finance detailing the proposed tax and social policy work programme of the Government for the period ahead (once agreed by Cabinet). Budget forecasts and updates Forecasts and updates include: Tax and non-tax forecasts for the annual Budget (Budget Economic and Fiscal Update) Updates to forecasts (Half Year Economic and Fiscal Update) Pre-election forecasts (Pre-Election Economic and Fiscal Update) Reports on receipts against forecasts. Generic tax policy process A process designed to produce better, more effective tax policy. There are five key development stages: 1. Strategic: This involves the development of an economic strategy, a fiscal strategy and a revenue strategy. 2. Tactical: This involves the development of a work programme and an annual resource plan. 3. Operational: This involves detailed policy design, formal detailed consultation, and Ministerial and Cabinet approval of detailed policy recommendations. 4. Legislative: This stage, which can occur concurrently with the operational stage, involves the translation of the detailed policy recommendations into legislation. 5. Implementation and review: This involves the implementation of legislation and any post-implementation review. As agreed - advice, including reports The time by which advice, including reports, is required is often negotiated according to the Minister s priorities. The Minister can change these deadlines because of changing priorities. As agreed bills Bills as set out in the Government's legislative programme. This is developed in December/January each year. As agreed - budget forecasts and updates The timetable set by Treasury for preparing budget forecasts and updates. Performance Delivery and Measurement Document 2011/12 Page 6 of 16

Process Policy development using the generic tax policy process: The main objectives of the generic tax policy process are to: Encourage earlier, explicit consideration of key policy elements and trade-offs by Ministers Provide opportunities for substantial external input into the policy formulation process, which is intended to increase transparency and to provide for greater contestability and quality of advice at both the conceptual and detailed design stages Clarify the responsibilities and accountabilities of participants in the process Improve the management of the tax policy process Ensure that the performance of tax policy initiatives, as well as the process of reform, is reviewed regularly. Key indicators of whether the generic tax policy process has been followed may include the following: Revenue strategy agreed with the Minister Agreed work programme in place Discussion documents prepared for major reforms Issues papers prepared for issues of a highly technical nature or limited to a specific audience Commentaries published on taxation bills before Parliament Consultation undertaken during the main stages of the process. Work programme development The tactical stage of the generic tax policy process is to develop a tax policy work programme that gives effect to the Government's revenue strategy. The preparation of the work programme involves: The initial scoping and conceptualisation of broad policy proposals Prioritising and sequencing the development of tax policy initiatives. This process results in a joint report by Inland Revenue and The Treasury to the Minister of Revenue and Minister of Finance. This report provides a detailed outline of the tax policy work programme proposed by officials. The tax policy work programme is then sent to Cabinet for approval. Once approved by Cabinet, and with the Minister s approval, the work programme is published (some projects may not be made public). The agreed work programme is then reported on and revised as appropriate during the period. This also includes updates to Ministers, generally every month and quarter. Reports and advice Requests for advice are either written or verbal, e.g. telephone requests and requests at meetings. Performance Delivery and Measurement Document 2011/12 Page 7 of 16

All reports to the Minister are signed by the Deputy Commissioner Policy or by the appropriate delegated person, who takes responsibility for their content. Reports to the Minister and working papers or other sources of information are retained on legislation files in National Office under the control of the Deputy Commissioner Policy. A periodic review to check the quality of a sample of reports may be undertaken. Bills Every year in December a 'bill bid' is made. This bid sets out the bills an agency will deliver during the next calendar year, with a brief outline of the topics it will cover and an indicative timetable. This is used to develop the Government's legislation programme. Bills are developed progressively during the year and incorporate changes up until the time a Bill is compiled and introduced in the House. The existence of a Bill as introduced to the House is evidence of the agreed timeframe being met. Budget forecasts and updates Inland Revenue will agree a timetable with Treasury for production of the forecasts and updates. Inland Revenue produces forecasts independently of Treasury. Inland Revenue and Treasury consult to see if consensus can be achieved. Each Department reports to its Minister. Performance Delivery and Measurement Document 2011/12 Page 8 of 16

Output 1.1 Policy Advice in Relation to Tax and Social Policy Quality 1.1.2 External Percentage of regulatory impact statements assessed as adequate - advice is complete, convincing, consulted, clear and concise (details available at http://treasury.govt.nz/publications/guidance/regulatory). Target: 100% Purpose The measure ensures that Inland Revenue meets central agency requirements for regulatory impact analysis. Link to Our Impacts The work of our Policy Advice division is linked to and impacts across the entire tax system. A good tax system where both policy and the administration are working well together helps to create an environment where taxpayers comply with their legal requirements voluntarily, where businesses grow and New Zealand becomes an attractive option to investors. Inland Revenue collects significant amounts of revenue to finance government spending using broad tax bases and we believe that when the tax system is mainly seen as fair, this will encourage taxpayers to register when they should, provide complete and accurate information and take part in social support programmes. Definitions Assessed as adequate Overall assessment of the quality of a Regulatory Impact Statement (RIS). Adequate means that a RIS fully or partially meets the RIS quality assessment criteria - this is assessed as part of the independent quality assurance assessment of a RIS. Quality assurance assessments Quality assurance assessments are completed as part of the independent quality assurance process for regulatory impact statements (RISs). A template is provided as a guide for completing the assessment. The template covers the dimensions of quality assurance that RISs are assessed against: whether the advice is complete, convincing, consulted, clear and concise. Performance Delivery and Measurement Document 2011/12 Page 9 of 16

"Regulatory Impact Analysis Handbook" Handbook published by Treasury that provides guidance on the requirements and processes for undertaking regulatory impact analysis. This is available at: http://treasury.govt.nz/publications/guidance/regulatory. Regulatory impact analysis requirements These are the requirements set out in Regulatory Impact Analysis Handbook published by the Treasury. Briefly, these requirements cover: Determining whether the regulatory impact analysis requirements apply for an item of work Preparing a Preliminary Impact and Risk Assessment (PIRA) Undertaking regulatory impact analysis Preparing the regulatory impact statement (RIS) Completing the disclosure statement Training independent quality assurance Preparing the Cabinet paper Obtaining Ministerial Certification Publishing the RIS Post implementation review for all 'significant' proposals that do not meet RIA requirements. "Regulatory Impact Statement (RIS)" A document that summarises the regulatory impact analysis undertaken for an issue. It represents the agencies advice to the Minister(s) and Government on an issue. "Policy toolkit" Web-based resource for policy staff that covers the main steps and activities for the policy development process used by Policy Advice Division, Inland Revenue. This includes process maps, templates and other resources to help staff as they develop tax and social policy. This is available for staff within Inland Revenue at http://imsprod02/policy-toolkit. Process Regulatory impact analysis is aimed at improving the quality of regulation - see the Government's statement on regulation at http://treasury.govt.nz/publications/guidance/regulatory. Detailed guidance about undertaking regulatory impact analysis is covered in Treasury's Regulatory Impact Analysis Handbook. Detailed processes for developing tax and social policy, including the regulatory impact analysis requirements, are covered in the Policy Toolkit. Performance Delivery and Measurement Document 2011/12 Page 10 of 16

Key steps and monitoring points in the process are: 1. Completing the Preliminary Impact and Risk Assessment (PIRA): once a piece of work is allocated policy staff may be required to complete a PIRA. A register is kept of new work allocated and when the PIRA is completed. PIRAs are held in the policy files for an issue. 2. Preparing the Regulatory Impact Statement (RIS): this represents the agencies advice to the Minister(s) and Government on an issue. The analysis and supporting information is created and gathered as part of the policy development process. Staff are encouraged to draft the RIS during the policy development process. The completed RIS is attached to the Cabinet paper. The RIS and supporting information are held with the policy files for an issue. The RIS covers: Agency disclosure statement Description of existing arrangements and the status quo Problem definition Objectives Regulatory impact analysis - identification of the full range of feasible options, and analysis of the costs, benefits and risks of each option Consultation Conclusions and recommendations Implementation issues, including risks Arrangements for monitoring, evaluation and review. 3. Disclosure statement for RIS is completed: the disclosure statement is part of the RIS and is signed by the Group Manager, Policy Advice Division. The disclosure statement: Highlights any key gaps, assumptions, dependencies and significant constraints, caveats or uncertainties in the analysis Indicates whether any of the policy options are likely to have effects which may not align with the commitments in the Government Statement on Regulation. 4. Independent quality assurance of the RIS is completed: this is undertaken by the Regulatory Impact Analysis Team in Treasury for items that are considered 'significant' and by the Work Programme Manager for other items. The quality assurance template is used as the basis for undertaking the independent quality assurance, with copies held by the Work Programme Manager. 5. Cabinet paper: most policy changes require the preparation of a Cabinet paper. This represents the Minister(s) advice to Cabinet on the proposed changes. It includes an opinion on the quality of analysis and certification by the Minister(s) on whether the proposals are consistent with the expectations set out in the Government Statement on Regulation. 6. Publishing of the RIS: RISs are published where required on the agency and Treasury websites. Processes for regulatory impact analysis, including monitoring, are being progressively developed an updated as the regulatory impact analysis process is bedded in. Any changes to processes will be updated to the Policy Toolkit, once approved. Performance Delivery and Measurement Document 2011/12 Page 11 of 16

Output 1.1 Policy Advice in Relation to Tax and Social Policy Quality 1.1.3 External We will ensure that the Minister is satisfied with the quality of: Policy advice Tax legislation Revenue forecasts. Target: Achieved Purpose The purpose of this measure is to ensure that the Minister of Revenue is satisfied with the quality and timing of the advice, services and support provided by Inland Revenue. Link to Our Impacts The work of our Policy Advice division is linked to and impacts across the entire tax system. A good tax system where both policy and the administration are working well together helps to create an environment where taxpayers comply with their legal requirements voluntarily, where businesses grow and New Zealand becomes an attractive option to investors. Inland Revenue collects significant amounts of revenue to finance government spending using broad tax bases and we believe that when the tax system is mainly seen as fair, this will encourage taxpayers to register when they should, provide complete and accurate information and take part in social support programmes. Definitions Survey Survey of the Minister(s) conducted near the end of the year (June/July). Process Ministerial satisfaction Each year in June/July a survey is sent to the Minister to complete covering all the services provided by the Policy Advice Division for the previous 12 months. The Minister is asked to complete the survey and return it within two weeks. The results are summarised and presented to managers. Regular meetings are also held with the Minister(s), generally weekly, and are also an opportunity for the Minister to provide feedback. Performance Delivery and Measurement Document 2011/12 Page 12 of 16

Output 1.2 Ministerial Services Timeliness 1.2.1 External Minimum percentage of ministerial correspondence responded to within 10 days. Target: 95% Purpose The purpose of this measure is to ensure that the majority of customers who raise queries through the Minister's office receive a response within a set timeframe. Link to Our Impacts The customers right to question Inland Revenue helps to maintain public confidence in the tax administration which in turn helps to maintain high levels of voluntary compliance. Voluntary compliance is achieved through building trust and confidence in the tax administration and is more likely to be achieved when the public views the tax system as mainly fair. The ability to question the tax administration aids in the public perception of fairness. When customers are aware of their obligations and entitlements they are more likely to voluntarily comply with requirements and to register when required and provide complete and accurate information. Definitions Ministerial correspondence Letters to the Minister of Revenue that are referred to Inland Revenue for preparation of a draft reply. Note: where the Minister has referred the correspondence to the Commissioner for a response, this is recorded as a single piece of Ministerial correspondence and the same timeframe applies i.e. there is one piece of correspondence recorded and 95% must be replied to within 10 working days, whether signed by the Minister or the Commissioner. "Within 10 days A draft response is sent to the Minister's office for signing within 10 working days after the date of receipt. The 10 days starts on the day after we receive the correspondence as it is normally received from the Minister's office around 3pm each day in the Minister's bag. Performance Delivery and Measurement Document 2011/12 Page 13 of 16

Process Overview of the process: 1. Correspondence is received in the Minister's office and sent to the Ministerial Services team in the Minister's daily mail bag or via email for urgent items. 2. Items are recorded in the document management system - items are date stamped, scanned and added to the document management system (including recording the appropriate metadata). 3. Work is assigned using the workflow system and referred for a draft response to either: The relevant National Office business group, e.g. legislation and policy related items are referred to Policy Advice Division Hamilton Ministerial Services team for taxpayer specific correspondence. 4. Response drafted. This may include: A detailed report on the issue raised An interim response, e.g. where the Minister has referred the item to the Commissioner for a response. 5. Response edited by editorial advisors in the Ministerial Services team in Wellington. 6. Response printed on letterhead. 7. Sent for signature. 8. Copy of signed response scanned into the document management system. 9. Workflow closed-off and filing completed. Ministerial Services monitors the progress of all correspondence using the document management and workflow system. Reports and statistics required are generated from the information recorded in these systems and used monthly for internal management reporting and quarterly for external and annual reporting to the Minister. Performance Delivery and Measurement Document 2011/12 Page 14 of 16

Output 1.2 Ministerial Services Timeliness 1.2.2 External Percentage of parliamentary questions responded to within required timeframes. Target: 100% Purpose The purpose of this measure is to ensure that a response is prepared for all parliamentary questions within the required timeframes. Link to Our Impacts The customers right to question Inland Revenue helps to maintain public confidence in the tax administration which in turn helps to maintain high levels of voluntary compliance. Voluntary compliance is achieved through building trust and confidence in the tax administration and is more likely to be achieved when the public views the tax system as mainly fair. The ability to question the tax administration aids in the public perception of fairness. When customers are aware of their obligations and entitlements they are more likely to voluntarily comply with requirements and to register when required and provide complete and accurate information. Definitions Parliamentary questions These are questions to the Minister of Revenue for written or verbal reply in the House of Representatives that are referred to Ministerial Services for preparation of a draft reply. Required timeframes The timeframes for parliamentary questions are: Oral questions: response with the Ministers office by noon on the day of receipt Written questions: six working days from the day they are lodged with the Office of the Clerk. Ministerial Services ensures that the response is with the Ministers office on the fourth working day from when it is lodged. Process Ministerial Services monitors the progress of all responses to parliamentary questions. Performance Delivery and Measurement Document 2011/12 Page 15 of 16

Oral questions Oral questions can be asked on any day Parliament sits. On receipt (any time up to 11am on a sitting day), Ministerial Services will alert the appropriate nominated person (or Deputy Commissioner in that person s absence) that he/she has an oral question to respond to. The nominated person is required to assemble all the background information relating to the question and report to the Minister of Revenue s office as soon as possible, but by noon at the latest this timeframe is not negotiable. The Press Secretary to the Minister of Revenue prepares the answer to the main question (and supplementary questions and answers from the information provided so it needs to be complete). The nominated person also needs to be available until 2.00pm in case the Press Secretary or the Minister has any questions that need answering. Written questions The Minister has six working days to respond to written questions from the day they are lodged with the Office of the Clerk. This normally means Inland Revenue has approximately three working days to prepare an answer and return it to the Minister s office. All questions are answered and responses need to be with the Minister s office by noon on the fourth working from the day they are lodged with the Office of the Clerk. The Minister's office needs to have sufficient time to check the information, make any changes necessary and have the response with the Office of the Clerk by 6pm on the sixth day from the day they are lodged with the Office of the Clerk. Performance Delivery and Measurement Document 2011/12 Page 16 of 16