The Inland Revenue Department has warned government that significant investment will be needed in its core systems — to the point of a full replacement.
The department’s key ICT system, FIRST is nearly 20 years old and has “grown unwieldy because of misalignment between its original tax-oriented design and the requirements of the various social policies it now has to cater for”, says IRD’s response to the line-by-line review, referring to areas such as family support and student loans.
Government could find itself conflicted over Inland Revenue, which is being asked to make savings at the same time as a report by the Auditor-General earlier this week points out inefficiencies in tax collection and a mounting tax debt.
“A review of the business requirements for Inland Revenue’s core IT system is required. This will identify opportunities to decouple components, simplify and align processes and create a new architecture that will provide adequate flexibility to meet changing policy requirements. It is likely that as a result of this review some or all of the current components of FIRST will need to be replaced.
“This is a large undertaking involving significant investment, but it is a process that Inland Revenue considers will be critical to maintaining an effective tax administration,” the IRD response says.
The ACT party’s revenue spokesman, Roger Douglas, in a radio interview arising from the Auditor-General’s report, flagged the possibility that work in the social policy areas may have distracted the department’s staff from its core tax responsibilities.
Revenue Minister Peter Dunne said earlier this week that the department plans to improve its systems to be “much more people responsive”. This includes a greater online component, allowing taxpayers, particularly businesses, to keep continuously in touch with their liabilities.
The implied ministerial endorsement means this initiative could be relatively safe from the cost-cutting knife.
Inland Revenue has already announced that it will cut up to 250 jobs in an effort to reduce costs.