IRD papers show IT system on brink of collapse

Inland Revenue’s IT systems mean the government’s tax-gathering arm is no longer able to do its job properly.

READ ALSO: Dear IRD - how to shave $1 billion from your $1.5 billion software spend-up

Papers released today paint a picture of an IRD teetering on the brink of calamity and where the systems and culture are so inefficient half of Inland Revenue’s data entry staff are engaged full-time in correcting the data entries made by the other half.

The department’s “systems and processes are not able to sustain or improve tax collection or social policy disbursement”, according to a “risk assessment briefing” prepared for ministers last August.

The IRD is also “not able to implement policy or operational initiatives in a timely and cost effective way” and “is not able to adequately respond to deliver better public services and is failing to meet stakeholders' expectations”.

In a cabinet paper by Finance Minister Bill English and Revenue Minister Peter Dunne at around the same time, the issues were put even more starkly.

“We are unable to respond rapidly and economically to government policy changes… We face an increasing risk of a systems failure that would severely damage our ability to collect and disburse money.”

This morning Revenue Minister Peter Dunne released an update on the government’s plans to upgrade the IRD’s systems.

The latest update takes the estimated cost to $1 billion to $1.5 billion over a 10-year period.

Officials and ministers have been talking about the “transformation” of IRD as a project since 2008, when the antiquated state of the department’s systems was identified as a problem during the dying days of the last Labour government.

IRD’s IT systems were mostly devised during the 1990s, when the tax system was relatively simple and before large range of other government programmes, such as Working for Families, KiwiSaver, child support, student loans and paid parental leave were added.

One senior accountant has described IRD’s IT operation as “where obsolete mainframe computers go to die”.

The background papers released this morning also highlight cultural as well as technical issues facing the IRD.

“The organisational culture is oriented toward [internal] business processes rather than toward providing customer-centric services.

"System complexity has increased dramatically to accommodate Inland Revenue's expanded role in the administration of social policy.

"The technology platform (FIRST) now has approximately 40 million lines of highly intertwined software code, which means it is expensive and time-consuming to adapt the system to new customer requirements, such as smartphone access.”

The complexity of the system also means 550 of the IRD’s 1100 data entry processing staff are engaged full time in correcting other data entries.

Mr Dunne today was putting a positive glow on the number of ad hoc arrangements Inland Revenue’s staff have had to make to the IT systems.

“Basically, system modifications, manual interventions and workarounds have spoken volumes for Kiwi ingenuity, but have resulted in layers of complexity for government and customers alike,” he says.

“It is fair to say the revenue system is at capacity, and the government recognises the need for a substantive transformation programme to shape Inland Revenue to best serve New Zealand in the future.”

At the time of the last Budget, Mr English said the government would not be able to make any major changes to the country’s tax framework even if it had the fiscal headroom to make such changes, because IRD’s IT systems would not cope with any major changes.