Dave Ananth calls for personal engagement with tax staff, not more AI automation, as taxpayers try to navigate an increasingly complicated system in an increasingly difficult economy

By David Ananth*

Inland Revenue is right to modernise New Zealand’s tax system. In many ways, it has little choice.

The old model of taxpayers filing returns months after transactions occur is slowly disappearing. Technology now allows Inland Revenue to receive information earlier, identify risks faster and intervene sooner when problems start emerging.

That direction is not unique to New Zealand.

Tax authorities globally are moving towards increasingly digital systems built around real time information, automated reporting and greater integration with software providers and intermediaries.[1]

Two recent Inland Revenue consultation papers make that direction very clear.

The first is Inland Revenue’s April 2026 consultation paper on tax intermediaries and digital tax administration. The second is Inland Revenue’s May 2026 GST consultation paper looking at invoicing reforms and modernised reporting systems.[2]

Read together, they show quite clearly where Inland Revenue is heading.

At a high level, much of this makes sense.

Earlier visibility may allow Inland Revenue to identify financial distress before taxpayers fall into catastrophic debt situations. Better integration may reduce duplication and improve compliance. Digital systems can make parts of tax administration more efficient for both Inland Revenue and taxpayers.

From Wellington, much of this probably looks logical.

On the ground, things can look very different.

As someone who works daily with taxpayers dealing with Inland Revenue disputes, tax debt problems, GST failures, overseas student loan matters and business cashflow pressures, I can already see where some practical difficulties may start appearing.

The issue is not whether digital reform should happen. It should.

The issue is whether enough practical support exists for taxpayers expected to operate inside increasingly complicated digital systems.

That is a very different question.

There is often an assumption in policy discussions that digital compliance is relatively straightforward because software now exists for almost everything.

But software is not free.

Inland Revenue’s own 2024 compliance cost survey found that while in-house time spent on tax compliance had reduced slightly, total compliance costs for small businesses had continued to increase, particularly external software and professional service costs.[3]

And many business owners are already exhausted.

Across New Zealand there are small businesses already struggling with payroll systems, GST filing obligations, invoicing requirements, AML compliance, Companies Office obligations, rising accounting costs, staffing shortages and cashflow pressure.

Some are tradespeople trying to run small businesses.

Some are older New Zealanders who never grew up operating in digital environments.

Some are migrant business owners still trying to understand the New Zealand tax system itself.

Others operate small home based businesses with very limited administrative support.

Many are simply trying to keep the doors open.

Technology vendors will probably do very well from all this.

Software companies will benefit.

Accounting platforms will benefit.

Digital integration creates opportunities for entire industries built around ongoing compliance management.

But many taxpayers will quietly absorb another layer of ongoing operational cost at a time when many businesses are already under significant pressure.

That reality is sometimes underestimated in policy discussions.

To be fair to Inland Revenue, there are good reasons why the department wants earlier visibility. Most serious tax debt situations do not emerge overnight. A business falls behind on GST. Then PAYE. Then provisional tax.

Penalties and interest start accumulating.

Cashflow deteriorates. The directors stop opening Inland Revenue letters.

Eventually the problem becomes unmanageable.

By the time many taxpayers seek professional assistance, the debt position is already severe.

I see this regularly.

If Inland Revenue can identify distress signals earlier through digital reporting systems, there is at least the possibility of engaging before matters become full enforcement situations.

That is one of the strongest practical arguments supporting greater digital integration.

But there is another side to this as well.

Not every compliance problem involves deliberate noncompliance. Not every taxpayer falling behind is dishonest. Many are simply overwhelmed.

Behind many serious tax debt files sit illness, business collapse, relationship breakdowns, financial illiteracy, addiction, migration stress, mental health pressures or simple fear and avoidance.

Some taxpayers avoid Inland Revenue because they panic. Others become paralysed by the situation and hope it somehow improves on its own. That usually makes things worse.

This is where tax administration becomes more complicated than simply collecting data.

Technology can identify patterns and risk indicators. But technology alone cannot exercise judgement, proportionality or practical wisdom.

That human layer still matters.

In fact, as systems become more automated, experienced Inland Revenue staff capable of applying common sense and practical judgement may become even more important, not less.

One issue that probably deserves far more attention is accessibility.

Over the years, Inland Revenue has moved heavily towards online systems and call centre based engagement. 

For many taxpayers, that works perfectly well. For others, it does not. There are still many New Zealanders who simply need to sit across a table from somebody and explain their situation. Not a chatbot. Not an automated portal. An actual person.

This becomes particularly important for senior citizens, migrant communities, vulnerable taxpayers, regional communities, home based business operators and smaller businesses with limited administrative capability.

Many people are not comfortable navigating increasingly technical digital systems. Some struggle with the language. Some struggle with the technology itself. Some are simply intimidated by Inland Revenue generally. Others do not even realise they are already falling into difficulty until penalties and enforcement action begin appearing.

This is where Inland Revenue may eventually need specialised taxpayer support teams focused specifically on helping people adapt to increasingly digital compliance systems before problems escalate.

Not enforcement teams. Practical assistance teams. Teams capable of helping taxpayers understand obligations, navigate systems and engage early before debt positions become serious.

That could include dedicated non digital assistance channels, transitional support for small businesses struggling with software costs, and practical guidance teams focused on helping taxpayers adapt before problems become enforcement matters.

Long term, that may reduce enforcement problems more effectively than enforcement alone.

Artificial intelligence will accelerate this transition even further over the next decade.

AI driven compliance systems, predictive risk analysis and automated monitoring are already developing rapidly globally.[4]

Used properly, these systems may allow earlier intervention and more targeted assistance. Used poorly, they risk creating compliance systems that become highly efficient on paper while becoming increasingly difficult for ordinary people to navigate.

That gap matters. Because tax administration is ultimately still about people.

The consultation paper on intermediaries also signals another broader structural shift.

Historically, accountants and tax agents mainly acted as advisers and return preparers.

Increasingly, software providers, payroll systems, accounting platforms and digital intermediaries are becoming integrated parts of the compliance infrastructure itself.

That changes relationships. It changes responsibilities. It changes costs. It also creates increasing dependency on commercial software systems simply to remain compliant.

Again, none of this means Inland Revenue is wrong to modernise. The system does need updating. The old paper based world is not coming back. Digital integration is inevitable.

But implementation still matters.

A modern tax system must still work in the real world. It must still recognise that not every taxpayer operates with the same technological capability, financial literacy or administrative support.

Otherwise, there is a risk that the system becomes increasingly efficient for organised taxpayers while becoming increasingly difficult for vulnerable taxpayers to navigate.

That is where practical support becomes critical.

The consultation papers are important because they show where Inland Revenue is heading. The direction itself is understandable.

The more important question is whether we are building enough practical support around taxpayers expected to adapt to these changes.

Because behind every tax file sits a human being trying to navigate an increasingly complicated system in an increasingly difficult economy.

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^Footnotes

^{[1] OECD, Tax Administration 3.0 and digital transformation initiatives, including developments in Australia, the United Kingdom and Singapore.}

^{[2] Inland Revenue, April 2026 consultation paper on tax intermediaries and digital tax administration, and Inland Revenue, May 2026 GST consultation paper on invoicing and reporting reforms.}

^{[3] Inland Revenue, 2024 study on the time and cost of doing business taxes incurred by NZ small businesses, September 2024. The survey found that while median in-house compliance time reduced from 36 hours in 2021 to 32 hours in 2024, total median compliance costs increased from $5,349 to $5,749, driven largely by rising external software and professional service costs.}

^{[4] OECD and international tax administration developments relating to AI driven compliance monitoring, predictive risk analysis and automated reporting systems.}

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*Dave Ananth is a principal at Meridian Partners, specialising in IRD disputes, enforcement, and student loan matters. His background, profile and contact details are here.