Crazy to think the effective collection of tens of billions of our tax dollars every year is dependent on museum-grade technology.
The Inland Revenue Department has been pleading for a new computer system for years. Its current one (known as FIRST) was built in 1992 when the Internet was still in nappies. Google didn’t exist and Facebook was more than a decade away.
In February this year, the Prime Minister said tax policy was being held back because the computer systems “can’t actually support radical changes from Government.” He also said “You don’t want to be in a position where Parliament is held hostage to a lack of technology.”
But New Zealand is being held hostage to this technology. Well placed sources tell me that the Government couldn’t currently implement a capital gains tax - even if it woke up to the need for pro-growth tax reform to support our exporters - and actually wanted to follow the advice of tax experts including Treasury officials, the World Bank, the OECD, and others.
This Government has tinkered with tax-thresholds and it gave tax cuts to the most wealthy in 2010, but it hasn’t made the big structural changes necessary to get our economy on track. Perhaps it is afraid of getting burnt again after an attempt at building a new system to cope with Student Loan changes was abandoned with $21 million spent last year. Certainly development plans have gone quiet since.
Despite Key’s statements in February, no credible timeline for the necessary comprehensive replacement system has been ventured by the Government.
Meanwhile the legacy FIRST system creaks on. Unlike in modern IT, changes made in one part of the FIRST system do not flow through to others. Consequently even mild changes are time-consuming to implement. A limited budget means resources supporting the antiquated system are not available in the same measure to support other core activities. Resources are stretched - and so more and more mistakes are being made.
Yesterday, Peter Dunne responded to my press release concerning the urgent need for upgrade, by defending IRD’s most recent performance lapses as the result of human error and poor forecasting (leaving the personal slights aside). Well and good, but with all due respect – those are precisely the kinds of errors that are made when an organisation is stretched. And to those could be added around $7 Billion in outstanding debt and a surprisingly high number of unprocessed tax returns.
What is urgently needed is commitment from the Government to a system upgrade, accompanied by project details including a credible timeline for implementation. Any response prominently featuring the word ‘relaxed’ and speaking of 5-10 years simply won’t cut the mustard.
Updating our IT shouldn’t be that hard. We can learn from others. After all, we’re not the only country in the Western World with a tax system.
“Unlike in modern IT, changes made in one part of the FIRST system do not flow through to others.”
I love the optimism expressed in that statement.
Be careful what you wish for, David. Key could put all our tax records in the ‘cloud’.
hmmm so many of the problems date back to Labour’s time in govt and when Labour turned the tax system into a welfare system. And now it is National’s fault…
“Updating our IT shouldn’t be that hard.” Sounds like the voice of an expert. Please tell us why it shouldn’t…
You know we are successfully working on banking systems whose legacy dates back to the late 60s early 70s? They aer so embedded it is difficult to change the core systems. There are ways to manage them, however.
LOL
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1992 – We really are a banana republic!
http://fabrice.montupet.pagesperso-orange.fr/macplus.jpg
“updating our IT shouldn’t be that hard” and with that statement you show that you have no experience with large scale IT systems.
I’m rather glad that this isn’t being rushed as I’ve seen the fallout from hastily planned IT migrations and when a key portion of our governments revenue is at stake a little caution goes a long way.
To update any Computer system it only takes Budgetted Money which requires re Budgetting every two years – like the failed Police update a few years ago.
An IT paradise – it’s only Money – taxpayers.
I agree with Meh. Unfortunately—and somewhat not suprisingly if it’s put in perspective–large IT projects are hard. They require lengthy planning, design, development, and implementation processes that in this case need to be right first time. It may seem that such things should be simple, but you only have to look to a recent example from the Ministry of Education and their payroll system, or the Correspondence School and the problems with their learning management system to see that these things are less than easy to implement. Also, saying we can learn for others is all well and good as long as the contract isn’t given to Oracle, therefore making New Zealand the first country in the world (so I’ve read) to implement their tax suite.
@meh no need to fear this is bring rushed. The IRD have been calling for this the whole 7 years Dunne has been Revenue Minister and there’s no sign of any action yet.
@David LOL
Have a look at the IT cockup at Building and Housing…I’m glad the IRD are taking their time, may they take as much time as they can…20, 30, 40, years…at some stage in that time the pointy-headed minister for IRD will be gone from Ohariu
they are not “taking their time” – nothing’s happening!
I was involved in the specifying stage for a new Item Master and POS system for a company I worked for. That project had a timeline of 5 years.
Even thought it was a complex piece of kit, I would think a tax software package for the IRD (which would surely be bespoke, and would have to be as thoroughly future proofed as possible) would be an extremely complicated project indeed.
Did you actually do some basic research into what was needed before posting this [ed. trolling comment]?
[please read the comments above Rob. Dunne has had this on his plate for 7 years. As yet we don't even have a timeline for any change. David]
The concept is a simple one…. The work required is significant, once it actually starts…. which it obviously hasn’t in any meaningful way….
A good team of system analysts would be able to configure the foundations of a new system within two years…. implementation is actually relatively easy, as long as the basic structures have been properly developed….
Seems like a job best left to a competent minister to oversee…
Fortunately, we should have one in a year or two…Once the change of government happens…
I read them, and don’t disagree that they should update the system, but -
You said ‘Any response prominently featuring the word ‘relaxed’ and speaking of 5-10 years simply won’t cut the mustard.’
People commenting (not just myself) suggest that 5-10 years is possibly a realistic time frame.
I questioned that you had one some research on this. Perhaps using the word ‘basic’ was a bit flippant, but hardly trolling.
bbfloyd wrote: “A good team of system analysts would be able to configure the foundations of a new system within two years”
That assumes that the foundations of the system remain stable – recall that IRD has a system that *integrates* not just income tax but also student loans, child support, kiwisaver and family support payments (aka working for families). Think back to how much these have changed over the last seven years and how the govt always wants changes done in the shortest time for the lowest cost and you’ll understand why it’s still done in FIRST and not in a new system – building a *new* system is expensive and takes time.
Also the complexity of the system is such that many of the rules were embedded within it and not documented by Anderson Consulting when they built it – hence discovery of the requirements from scratch by outside consultants will most likely take more than two years, especially given that many of the rules are historic (I believe this was the main issue with student loans). Just think of how many different versions of the IR3 there have been over the past seven years, then add in the various IR4s etc
Obviously nothing was learnt from the INSIS C*** Up.
The KISS Principle works prity well in business Keep It Simple Stupid.
Nothing has changed in the last 100 years we have just made life more difficult.
@KN… I understand your point, but you seem to have made rather a lot of assumptions….
Firstly,.. what’s being talked about is “the foundations of a “new” system”… This should allow you to presuppose that this isn’t just “tacking on” to the existing system…
I’m not quite sure why this is so difficult to understand…
Secondly,.. two years is a hell of a long time when what is being done is simply setting out a “foundation” for a new system…. Implementing that could take months, or years, depending on whether the responsible minister employs competent people, or whether the job goes to “friends of friends”….
If I’m making this too complicated, let me know, and i’ll try to simplify it…(not sure how it can be simpler, but I will try)…
What David called at the end of his post was ‘a plan to upgrade the system that isn’t relaxed and won’t take 5-10 years’. It’s hardly likely from the tone of the piece that he is suggesting it should take longer than 5-10 years.
David never mentioned a time for the foundations of the system at all.
A few years back I was a Senior Analyst for a US State tax computer system. I learnt very quickly why it was so flexible and could deal with all the changes from legislators. And that was a few politically strong people who could make sensible decisions and stand by them during the resulting political fallout. One being the Director of IT, the other being his boss.
Having worked for the IRD for several years and used the FIRST system in some detail, even a time frame of 5 years for such an upgrade would not be ‘relaxed’.
The system is huge, it captures so many tax types (many strange types most people will never hear of), across so many tax payers (of varying types with specific rules). To upgrade is going to be a mammoth task, with an equally mammoth budget (it wouldn’t surprise me if it cost upwards of $1bil)…
Yes the problem does need to be addressed, however like many things we best not jump into the deep end, but rather take a clear and concerted approach with a realisitic time frame. Politically pushing the implementation of a new system could lead to catastrophe…
@andrew even if a 5 year timeframe is required for the full change, I’m hoping we’re already a fair way down that track. Peter Dunne has been aware of this issue for all 7 years he’s been Revenue Minister. I am sure the public of New Zealand would be reassured to see a plausible timetable (any timetable would be a start!)
A reassuring timetable is especially important after Key’s comments back in February about our tax system not being able to handle the kinds of changes most economic commentators are saying are necessary to get our economy back on track.
I’m going to have to agree with Insider on that one. According to the Interest link you provided Labour were told in 2005 that IRD needed a new computer system. They should have done something then.
And for three of those 7 years it was a Labour led government and it would have been Cabinet making the decision for the extra funding. The only reason for this not to have been done is if Dunne didn’t bring it to the notice of the entire government.