An upgrade of the Inland Revenue's computer system costing up to $1.5 billion has been approved, with Revenue Minister Peter Dunne admitting the current system is ''creaking''.
Cabinet has approved in principle the major overhaul, one of the largest projects of its kind ever undertaken in New Zealand.
It will upgrade a system which has been transformed over the years from a tax system collecting only income and company tax, to one which covers child support, to student loans, to KiwiSaver and Working for Families.
Dunne says this means the current software system was under strain although he denies the tax system was under imminent threat.
The upgrade will be ''a substantial and complex project on a very large scale'', Dunne says, expected to take up to 10 years, with previous estimates that it will cost $1billion - $1.5 billion.
In the coming months Dunne will take firm plans to Cabinet about which sectors should be affected by the changes first, and how IRD will engage with the public and other interested parties.
The problems faced by the troubled teachers' payroll software Novopay ''looms large'' in Dunne's mind, and action is already being taken not to repeat them, admitting similar issues in the tax system would lead to chaos.
He will meet with other ministers in the coming weeks to establish clear engagement.
''I don't want to have the sort of Novopay situation repeat itself where we find out about the problems too far down the track,'' Dunne said.
''We'll be working pretty closely with other ministers sort of every step of the way...Once you embark upon the process you can't stop. That's going to be the challenge, making sure no one gets the stitch half way through.''
While he did not know exactly how the contract will unfold, Dunne expects it will be done in chunks, with a number of suppliers doing different parts of the job.
''Some of the work, I think, is perfectly capable of being done locally, and I'd be keen for that to happen.''