Taxman ponders Xero offer to cut transformation costs

As an auditor general's report lifts the potential cost of Inland Revenue's transformation to NZ$1.9 billion, Xero says it will build open tax filing interfaces for free.

Cloud accounting software developer Xero is offering the New Zealand Department of Inland Revenue (IRD) a way to save NZ$50 million or NZ$100 million on its 10-year transformation costs.

CEO Rod Drury said the company has already built prototype public interfaces for filing GST returns, and is prepared to build payroll and income tax interfaces for free.

Rod Drury

Yesterday, an auditor-general's report put the potential cost of the IRD's project at between NZ$1.3 billion and NZ$1.9 billion, opening the door to costs well above the IRD's estimated maximum of NZ$1.5 billion.

Drury, a vocal critic of the IRD's transformation plans when they were first announced, said his company has been talking to the IRD constantly about technology. However, in the last two years, that collaboration has become very close.

"Some of the front-end work IRD has to do the private sector has to do anyway," he said.

Drury said he is encouraging the IRD to think of itself as a wholesaler, and allow the private sector to build the public forms.

At the Xerocon conference in Auckland on Friday, he said he is also encouraging the IRD to adopt platform as a service (PaaS) as the architecture for its transformation. Since AWS and Microsoft have invested in datacentre capacity in Australia, he said, that falls under New Zealand's Closer Economic Relations treaty and offers a potential path to a modern architecture.

He said a PaaS strategy would offer another series of opportunities to cut project costs and lower risks.

The auditor-general's report said the IRD's program has been operating for about four years, and has an anticipated further eight to 10 years to go.

"It involves significant public spending (estimated to be between NZ$1.3 billion and NZ$1.9 billion, dependent on decisions to be made by ministers and by Cabinet), with NZ$83 million spent as at the end of November 2014," it said.

"We have found that Inland Revenue's governance of the program has provided clear direction, and supported clear and effective decisions. However, Inland Revenue needs to watch and carefully manage specific risks to effective governance. Inland Revenue is aware of these risks."

Drury said that Xero isn't just engaging with the IRD, but with organisations such as Statistics NZ and the Accident Compensation Corporation (ACC) as well.

He has talked about a new "financial web" linking small and large businesses and government.

"It's quite a big change from the way people think about small business software," he said.

On Friday, Xero's New Zealand boss Victoria Crone announced new partners to its Business Connect ecosystem in addition to Z Energy and BizRewards, which went live last year. PlaceMakers and NZI are now going live, and Meridian Energy, Watercare Services, and Office Max will be integrated by the end of the year.

Xero Business Connect integration automates invoice processing and the transfer of documentation and information.

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