IR disables old tax system, as verdict is reached on $ 1.5 billion overhaul
Business groups have joined Inland Revenue in calling the largest public sector IT project a success, after IR shut down its first IT system after a five-year transition to new technology.
Entrepreneur Unisys on Wednesday unplugged mainframe computers at its Auckland and Kapiti Coast data centers that have run the tax system for more than 20 years.
The gradual shift to a new software system built by the American company Fast Enterprises called Start has gone hand in hand with tax rules designed to ensure that people and businesses are taxed more accurately throughout the year, and has saw the strength of IR drop from 5,662 in June. 2016 to less than 4000 today.
With only a little tidying up to do, including migrating some ‘legacy’ data, IR chief executive Naomi Ferguson said the cost of the Business Transformation (BT) project would likely be a little less. of $ 1.5 billion, including staff and other internal and consulting costs.
* Inland Revenue has cut 1,000 jobs since the start of its $ 1.7 billion transformation project
* IRD strengthens its call centers to manage the “biggest tax change in a generation”
* Inland Revenue has its foot on two stepping stones
That’s below its capital and operating budget of $ 1.7 billion, which included some leeway for the unexpected.
Figures released by IR suggest that on some measures the project may already be on the verge of paying for itself.
By the end of June, IR estimated that BT had saved small and medium-sized businesses a cumulative $ 640 million in compliance costs, reduced IR’s own administrative costs by $ 205 million, and achieved the goal of generating 570 million dollars. millions of dollars in additional revenue for the Crown.
The latter was in part by eliminating toll tax refund claims.
These cumulative gains are expected to increase in the years to come.
But Ferguson said the changes BT made also resulted in automatic refunds to around 600,000 people who had not previously claimed them under the old system.
“90% of reimbursements go to people who earn less than $ 70,000 a year and that money will have been very valuable to them.”
Technological change also brought benefits that were difficult to quantify in dollars, she said.
These included enabling IR to rapidly implement and scale Covid relief programs such as Resurgence Support Payments, which would not have been possible in First, she said.
In 2012, IR frankly described its Cobol-based First system as “spaghetti-like” and difficult to adapt.
âIt’s like a house full of devices connected to electricity by a cable full of intertwined wires. When you change or disconnect a wire, it can be difficult to tell which devices in the house will be affected, âhe said at the time.
But Ferguson has provided no assurances that the actual completion of the transformation project will end the periodic long waits for people calling IR’s call centers.
She said call wait times were a narrow metric on which to judge the department’s performance, when most of its transactions were conducted through digital channels.
BusinessNZ Managing Director Kirk Hope said the IR had provided “a world-class tax administration infrastructure”.
But he said that shouldn’t mark the end of IR’s attempts to reduce the costs of tax administration and tax compliance.
John Cuthbertson, New Zealand tax manager at Chartered Accountants Australia and New Zealand (Caanz), said the BT project had “been absolutely a success”, despite problems with its third stage in 2018, when accountants reported big problems logging into MyIR from Inland Revenue. system.
âBeyond that everything went pretty much as planned and he did what he said he was going to do – and stayed under budget which is one of those things. which is very rare in IT. “
Cuthbertson called on IR to deepen its engagement with the private sector to build on the success of the system.
âIt must be recognized that this is a two-way effort, with not only the expectation that all innovation will come from the private sector.
âA lot of times after these big projects you have a reduced IT budget, which is not ideal because you still have to be able to innovate,â he said.
Ferguson said the IR had worked with ministers on a “green paper” that was likely to be released early next year that would address the issue of what’s next.
This could include measures to make tax compliance easier for the self-employed, she said.
“I think that’s going to be one of the things we’re thinking about now.”
IR was happy to discuss any ideas on how to work with the private sector on future opportunities, she said.
Some human resource practices related to the BT project have generated controversy.
These included the questionable treatment of outsourced call center workers hired to help during peak demand periods during the transition, and IR’s decision to ask 860 of its employees to perform psychometric tests during the transition. of a process in which he asked these employees to apply for new jobs. .
In 2018, Thing Showy framework contracts provided by IR contractor Madison Recruitment which appeared to offer outsourced call center workers poor security of their terms of employment and which one worker described as “probably the worst I have encountered in my life “.
The contracts prompted inquiries to the IR from then-Revenue Minister Stuart Nash.
Ferguson said she did not expect IR to use a significant number of outsourced call center workers in the future.
BT also exposed a large skeleton in IR’s closet, when it emerged during the transition that around 1.5 million people had paid the wrong tax rates on investments like Kiwisaver – some of them. between them for many years – in a situation where he was not able to completely relax.
Deputy Commissioner Greg James, who managed the BT project, said he has shown the importance of building trust internally and with stakeholders, and partnering with the right people, when making large IT projects.
James provided a high level of transparency on the goals and progress of the BT project from the start.
Fast Enterprises has performed exceptionally well, he said.
A team of around 40 or 50 company employees would remain in New Zealand, following the migration of the remaining legacy systems and data, starting in June of next year, to support and further develop Start, he said. -he declares.
The startup should last at least as long as First did, James said.
“My hunch is saying it’s here to stay as it’s going to continue to refresh every two years due to the research and development that Fast is putting into it themselves.”