Standard Business Reporting: Report Back to Cabinet May 2009

Proposal

1. This paper:

• Provides an update on the work undertaken within the Standard Business Reporting Programme since the last report back in May 2008;
• Proposes a revised set of SBR initiatives, in light of the initial cost-benefit analysis and the current economic environment.

Executive Summary

2. Standard Business Reporting (SBR) is a multi-agency programme of work involving the Ministry of Economic Development (MED), Inland Revenue (IR), Statistics NZ and ACC.

3. SBR aims to cut compliance costs for business by reducing the need to file the same financial information to multiple agencies, minimising duplicated and unnecessary data, and automating the preparation and filing of statutory returns required to be filed with the SBR agencies.

4. The Ministers of Commerce (Lead), Revenue, Statistics, Small Business and ACC are the Sponsoring Ministers of this programme.

5. In May 2008 Cabinet, before committing to the implementation of a SBR programme, requested a further cost and benefit analysis; conceptual design development; stakeholder consultation; and the scoping of the rationalisation of forms currently in use by SBR agencies. It also approved further analysis into a Single Business Number and invited the Minister of Commerce to report back to Cabinet with a progress report on these [CAB Min (08) 18/1 refers].

6. Given the current fiscal environment, the scale of investment required to implement the complete SBR solution is not feasible. Therefore a more modest but targeted approach, which continues to support the broad SBR goals, has been developed.

7. Cabinet is now recommended to agree to a number of smaller scale initiatives focusing on the SBR goals of compliance reduction, facilitating the productivity and capability of small and medium enterprises (SMEs) and supporting the Single Economic Market objectives. The initiatives are:

• Progression of trans-Tasman initiatives including the establishment of formal participation by New Zealand officials in the governance arrangements for the SBR Australian Programme supported by a Memorandum of Understanding;
• Progression of the potential for legislative alignment between Australian and New Zealand corporation laws to further facilitate trans-Tasman cross recognition of corporate filing obligations;
• Progression of the harmonisation and rationalisation of identified SBR forms, including developing and piloting a GST return taxonomy;
• Further evaluation of a Single Business Number (SBN) identifier for businesses, desirably based on an existing government identifier, in order to facilitate business-to-government transactions; and
• Increasing the capability and profile of the Business Portal www.business.govt.nz through the addition of business-to-government transactional capabilities, such as on-line connectivity to the Companies Office and Inland Revenue.

8. The following table details the funding requirements through to 2011 at which time the full set of benefits of these initiatives, in particular the harmonisation of data, will be available to business.

Background

9. On 27 August 2007, Cabinet considered the Quality Regulation Review (QRR) Final Report where business cited the reduction of duplicated information requests from government agencies, greater information sharing between agencies and the ability to transact with multiple agencies at one time, as key areas where cost compliance reductions could be achieved. The report identified the potential of an SBR programme as a possible way to achieve these outcomes. A cluster of agencies (MED, IR, Statistics NZ and ACC) which impose financial reporting obligations on businesses, was formed to evaluate the SBR concept and report back by 30 April 2008 with the results of that further analysis [CAB Min (07) 31/10 refers].

10. Following that report back, on 12 May 2008, Cabinet approved further detailed analysis of the technical solutions and economics of the implementation of an SBR initiative in New Zealand and invited the Minister of Commerce to report back, on behalf of Sponsoring Ministers, to the Cabinet Economic Growth and Infrastructure Committee by 10 December 2008 [CAB Min (08) 18/1 refers].

Overview

11. SBR aims to reduce the costs, frequency and time required for businesses to report financial information to participating government agencies by reducing duplicated reporting, automating the collection and submission of information using XBRL (eXtensible Business Reporting Language) technology and streamlining the information business reports to government.

12. The key reference point for the analysis and scoping of the SBR Programme has been the SBR Programme committed to by the Australian Government, which has invested A$230 million over three years for SBR implementation. That programme anticipates cost reductions of up to A$836 million per year will accrue to Australian businesses from 2013. Comparatively SBR's benefits to New Zealand businesses were calculated to be lower than Australia's due to the greater complexities in Australian regulatory requirements and the lower cost of compliance in New Zealand.

13. Using the Australian experience as a blueprint, five distinct elements were identified as forming the focus for a high-level analysis of the costs and benefits associated with SBR. These elements were:

• Design and Build: A high level conceptual design was completed and costs determined for a Service Delivery Platform (SDP) to transfer businesses' reported information into individual agency IT systems. Included in this work was an analysis of the possible use of the Business Portal as the channel for businesses which did not have accounting software to file reports.
• Data Standardisation and Taxonomy Creation: 97 forms were identified across the four agencies to be harmonised and rationalised. This study forms the basis of the new data harmonisation initiative, outlined in paragraph 23.
• Consultation: Two SBR stakeholder forums were established with participants from government agencies and business groups. Private sector interests, particularly tax agents and accountants, supported the SBR objectives and saw within them opportunity to spend less time on compliance and more on value added services.
• Single Business Number (SBN): A scoping study was completed into the implementation of an SBN, which identified benefits to both business and government. The preferred option was an SBN based on an existing government identifier. More detail is found in paragraph 18.
• Scope and Benefits: This study concluded that the total government costs of an SBR initiative in New Zealand over four years of implementation from 2008-2012 were in the order of $107.1 million with benefits starting to accrue to business in 2011/12 and reaching a steady state in 2015/16 of $152 million per annum.

14. The transition impacts on business, and the three year implementation timeline and cost of the proposed SBR model which formed the basis of the cost benefit analysis, are not considered sustainable in the current fiscal environment. An incremental, smaller scale approach is preferred.

15. This approach does not deliver the electronic business-to-government connection which is considered essential to the realisation of the full set of SBR benefits.

16. It should however be noted that a number of streamlining activities are already occurring within agencies. Inland Revenue, for example, has embarked on a project, Transform IR, which will merge and simplify company tax forms as well as reduce the information employers have to provide in the Employer Monthly Schedule (EMS). Statistics NZ is working to reduce its survey load on businesses, including streamlining its Quarterly Employment Survey (QES), which contains some duplication with the EMS, mentioned above.

Proposed SBR Initiatives in 2009/10

17. Five SBR initiatives are recommended for further progression. The estimated cost of these proposals is $4 million which is to be met from a mix of funding of $3 million (Budget 2009), an in principle transfer of $0.900 million (still to be requested) and $0.100 million to be absorbed within the Ministry of Economic Development appropriations.

(A) Single Business Number (SBN)

18. Businesses currently have a different way of identifying themselves with every government agency they interact with. An Australian Business Number (ABN) has already been implemented and lessons learnt there demonstrate there are significant business benefits in adopting an SBN in New Zealand. There is widespread support within the business sector for one identification number that each business would use to interact with all agencies. The potential to align a NZ SBN scheme with the ABN for trans-Tasman businesses will also form part of this initiative.

19. Initial analysis identified the preferred approach to be an SBN based on an existing government identifier. Using the Tax File/GST number, for example, would have considerable benefits, including lower business costs, quicker up-take and a simpler and more cost efficient implementation. IRD has yet to formally consider this option but that would form part of the further analysis and feasibility work is proposed which will be funded from the proposed in principle operational funding expense transfer from 2008/09 to 2009/10.

(B) Business Portal

20. The Business Portal (www.business.govt.nz) is a single electronic gateway to government where SMEs can obtain business advice as well as access information from across government. Currently purely a business information tool, the vision is to develop it into a "one-stop-shop" where businesses go to transact with multiple agencies.

21. The New Zealand Companies Office proposes to increase the capability of the portal by adding its transactional capabilities such as the filing of company annual returns. As this work is now being rescheduled for the 2009/2010 year we intend to seek an expense transfer in principle from 2008/09 to 2009/10.

22. In the United Kingdom the government mandated that all transactions available via individual agency websites must also be available from the portal (www.businesslink.gov.uk). We believe a similar policy would be beneficial in New Zealand.

(C) Harmonisation of Financial Forms

23. The SBR Programme identified 97 financial forms within the four SBR agencies as imposing on businesses the most compliance burden. The majority are from IR (60 forms) with the balance spread across Statistics NZ, ACC and the Companies Office. These forms represent 8,000 pieces of information and 11 million filings by businesses per year.

24. IR and Statistics NZ will lead this project which involves completing the internal and cross-agency form harmonisation and can be achieved over the next 12-18 months. This will be funded from the $3 million appropriation of 2009/10 operational expenditure.

25. Harmonisation includes identifying where the same or similar information is requested and reducing or eliminating any unnecessary data. Two examples include merging the Employer Monthly Schedule (EMS) and Quarterly Employment Survey (QES) and combining the IR4 (Tax Return) and IR10 returns.

26. As part of this initiative a taxonomy – or XBRL dictionary – will be built incrementally and a pilot undertaken around the GST return form. When completed, tax agents who currently electronically file (e-File) will be able to submit their GST returns based on the new taxonomy.

27. IR will receive the information directly from businesses and the information required by Statistics NZ will pass directly through an electronic channel, eliminating the need for several Statistics NZ surveys. The pilot will also provide a filing channel that will validate information prior to sending.

28. Use of the taxonomy will mean government receives higher quality business data making analysis easier and results from the analysis more reliable. In the long-term, this initiative will reduce compliance costs which will in turn improve business productivity. Businesses will save time and money due to fewer double-ups within forms and no longer having to supply the same information to multiple agencies.

29. The SBR taxonomy and software development work in Australia will heavily influence what is developed in New Zealand. Officials will continue to work closely with Australia to ensure the two taxonomies align.

(D) Trans-Tasman SBR Governance

30. An agreement has been reached with the Australian SBR Programme Director allowing for participation by a number of New Zealand officials at all levels within the Australian Programme. This initiative will be funded from agency baselines. they include:

• Reciprocal representation on the Australian SBR Steering Committee and the New Zealand SBR Board with a Memorandum of Understanding (MOU) being developed to formalise this agreement.
• The establishment of joint processes to ensure complementary trans-Tasman taxonomies are created.

(E) ASIC and the New Zealand Companies Office Alignment

31. The New Zealand Companies Office and Australian Securities and Investments Commission (ASIC) have been working together on initiatives to facilitate cross-recognition of trans-Tasman businesses, such as implementing an electronic information exchange between registers and the mutual recognition of banned directors in 2008.

32. Further opportunities can only be realised through aligning a number of legislative requirements. Standardising legislation will make setting up and maintaining trans-Tasman businesses easier and less time-consuming because they would no longer need to file similar information in both jurisdictions.

33. The SBR Programme considers there is potential to further align our corporate law filing obligations with Australia's through modest adjustments to existing regimes. The progression of this work will come from agency baselines.

Consultation

34. The following government agencies have been consulted on this paper: Inland Revenue, State Services Commission, Statistics New Zealand, Accident Compensation Corporation and Treasury.

Fiscal Implications

35. The initiatives described in this report are proposed to be funded from a mix of funding of $3 million (Budget 2009), an in principle transfer of $0.900 million (still to be requested) and $0.100 million to be absorbed within the Ministry of Economic Development appropriations.

Human Rights

36. There are no human rights implications associated with this paper.

Legislative Implications

37. There are no immediate legislative implications associated with this paper.

Regulatory Impact Analysis

38. The Regulatory Impact Analysis requirements do not apply, as there are no legislative implications associated with this paper.

Publicity

39. No public announcements will be required in the short-to medium-term.

Recommendations

40. It is recommended that the Committee:

1. Note that the SBR cost benefit analysis indicated that the, transition impacts on business, and the three year implementation timeline and cost of the proposed SBR model are not considered sustainable in the current fiscal environment.
2. Note that a late in principle expense transfer of $0.900 million from the 2008/09 financial year to the 2009/10 financial year is still to be requested.
3. Agree to a number of smaller scale initiatives focussing on the SBR goals of compliance reduction, facilitating the productivity and capability of small and medium enterprises (SMEs) and supporting Single Economic Market objectives. The initiatives are:
   • Progression of trans - Tasman participation by New Zealand officials in the governance arrangements relating to the SBR Australian Programme;
   • Progression of the potential for legislative alignment between Australian and New Zealand corporation laws relating to corporate filing obligations for trans-Tasman businesses;
   • Progression of the harmonisation and rationalisation of identified SBR forms, including developing and piloting a GST return taxonomy;
   • Further evaluation of a Single Business Number (SBN) identifier for businesses; and
   • Increasing the capability and profile of the Business Portal www.business.govt.nz through the addition of business-to-government transactional capabilities, such as on-line connectivity to the Companies Office and Inland Revenue.
4. Direct the SBR Programme to report back to the Minister of Commerce on the progress of the following initiatives, and provide more clarity around the likely costs in the 2010/11 year, by 10 December 2009:
   • Feasibility of a Single Business Number (SBN);
   • Business Portal capability enhancements;
   • Progress on data harmonisation and the pilot GST taxonomy;
   • Trans-Tasman SBR participation; and
   • Australia and New Zealand corporate legislative initiatives.
5. Note that as part of Budget 2009, $3 million operating was agreed for SBR, subject to Cabinet approval of the continuation of the SBR Programme.
6. Note that this paper will be published on the Ministry of Economic Development website, subject to any appropriate withholdings that may be required in accordance with the Official Information Act 1982.

Hon Simon Power
Minister of Commerce

Date signed: ______________

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