Inside the NZ tax system overhaul that was too big to fail

A seven-year transformation effort is nearing its end, and its programme manager describes how the “total makeover” was accomplished.

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Of all the projects that could be described as too big to fail, replacing a nation’s entire tax system would surely count as one of them. Greg James, a deputy director at Inland Revenue who runs that transformation project, describes it as a “total makeover”. More than a huge technology play, it’s a complete business transformation—reforming processes, legislation, and organisational design. “At the end of it, we haven’t upgraded anything; we’ve literally replaced everything,” he says.

According to its latest annual report, Inland Revenue collected revenue of $78.2 billion in 2019-2020, primarily from 3.9 million employees, 216,000 employers, and 377,000 companies. In addition to collecting tax, it administers, in partnership with other government agencies, social products such as child support, Working For Families Tax Credits, Kiwisaver, paid parental leave, and student loans.

The seven-year project to completely overhaul the tax system, known as the IR Transformation Programme, is entering its final year, and James is confident it will come in on time and below budget. “We will tie a bow around it, on or about 30 June 2022.” That’s in line with the approved proposal—and despite the replanning required due to the COVID-19 pandemic.

The initial budget approved by Cabinet was $1.5 to $1.7 billion, but James says its likely the final cost will be between $1.4 billion and $1.5 billion. About half that cost was financed accumulated depreciation, and the other half was new money to transform and renew, he says.

Relying on commercial tools for the long term

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