Tax transformation: $50 million down, $1.45 billion to go

New Zealand’s Inland Revenue Department has spent NZ$50 million so far on a massive transformation project, but the slow pace of change to date has some members of Parliament worried.
Written by Rob O'Neill, Contributor

Consultancy Capgemini is the major winner so far in the New Zealand Inland Revenue Department’s NZ$1 billion to NZ$1.5 billion, 10-year transformation project.

Capgemini was paid NZ$23 million of the NZ$50 million spent so far for what is described as “high level diagnostic work” and scoping ahead of major development.

The scoping work was contracted to improve the department’s understanding of its current system, requirements for conversion and on work defining the project, a Parliamentary review (pdf) says.

The review says members of Parliament sought clarification of Capgemini’s consultancy role because they “would be concerned if the firm were writing the design specifications for the project and then bidding for it.”

In response, the tax commissioner told MPs Capgemini’s involvement ceased in March 2013 and it did not participate in the preparation of the business case or in discussions with ministers.

Some MPs expressed their concerns that progress on the programme seemed slow. Despite the “urgent tone” of IRD’s briefing to the incoming minister five years ago, they said, the Government had still only reached an “in principle” decision on the project.

“This is worrying since the technology currently limits a Government’s ability to implement new policies,” the review says.

The tax commissioner responded that the programme is massive and IRD is approaching it in a “very considered way”.

The commissioner said a lot of preparatory work has gone into understanding the current system, what is involved in the transformation, and what services are wanted by the public.

IRD has taken a number of preliminary steps, it said. The dpartment has upgraded online services, introduced voice identification for customers and a mobile application, and secured a contract for continuing support of the existing mainframe.

Late last year, IRD inked a new eight-year mainframe services contract with long-term partner Unisys worth up to NZ$130 million.

IRD’s aging FIRST computer system, which processes more than 5.5 million transactions a day, has been progressively modified and extended since it was implemented in 1992. IRD says it was designed to collect tax but now also manages KiwiSaver superannuation, student loans and many other newer programmes.

Commissioner Naomi Ferguson told MPs the computer system remains secure, works well and could continue to deliver what is currently required for many years. However, it cannot provide many more services which the Government and the public might expect of it.

She emphasised that the transformation is about more than the replacement of IRD’s ageing computer system; it also entails improving the department’s policies, processes, and systems to meet the expectations of the Government and the public about appropriate levels of service.

A transformation plan has been developed comprising four stages: enabling secure digital services, redesigning and redeveloping the platform for business taxes, meeting the needs of social policy programmes, and a “sweep-up” stage for other matters.

A business case for the first stage will be developed later this year, IRD says. 

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