Replacing computer system a major task for new IRD chief

The new Commissioner of Inland Revenue, Naomi Ferguson, has her work cut out. Taking over from Bob Russell, Ferguson is now at the helm of an organisation which, like many others, is contending with the digital revolution, changing the ways people interact and transact.

So in a lilting accent - Belfast by way of Glasgow - Ferguson talks, like any chief executive, about "business transformation" so that it "delivers services to customers" in "ways that suit them".

Inland Revenue, after all, is not just a tax collector.


Over the years, Parliament has added to its functions with the student loans scheme, child support, Working for Families and, most recently, KiwiSaver.

"In the six years I've been away [she was deputy commissioner, service delivery, from 2003 to 2006], KiwiSaver has been introduced," Ferguson said. "Completely different from anything we've done before. The only commonality is that it involves money."

A major task will be replacing a computer system built for Inland Revenue 20 years ago. A ballpark cost estimate is $1 billion to $1.5 billion over the next 10 years.

"When it was built, Microsoft was a start-up firm and there was no internet," the department said in last year's briefing to the incoming minister. "It does not, therefore, cope well with demands for online access."

Nevertheless, every day the system, which quite simply must not fail, is delivering, Ferguson says.

Difficult as it may be, it's been possible to add new technology, like a mobile phone app launched in April, and new services such as payments by credit and debit cards.

"The work we have under way is about saying, okay, given what modern technology allows you to do, given what customers expect and want to do, how do we put all that together to create a very different type of tax department."

Ferguson is impressed by the cutting-edge voice biometrics Inland Revenue is using. "You register your voice, which is as unique as your fingerprint.

"We have 400,000 people using it. It means that when they phone up to do something they can go straight through to a system without having to go through the 'what's your mother's maiden name?' business."

The number of people who have registered to deal with Inland Revenue on line has grown exponentially, Ferguson says, to more than a million. But is the flipside of last year's 15 million "self-serve digital contacts" longer delays to get through to a person on the phone and fewer branch offices?

The department has reduced staff number by 800 since 2008.

Asked if she expects to be presiding over fewer people in five years, Ferguson is noncommittal. "I don't know. I can't tell the future on that one."

In its core role, gathering tax revenue, Inland Revenue depends on voluntary compliance. It needs to strike a balance, she says, between making it as easy as possible for those who are willing to do the right thing by their fellow citizens and coming down hard on those who choose not to.

"If people want to get it right, but there's something going on with their life that means it's going to be hard ... we'll try to find ways to make is easier."

But beneath the velvet glove is an iron fist. "We've had over 50 successful prosecutions in the past year; last week we saw the longest sentences (about eight years) ever handed down for tax fraud."

Fair warning from the IRD
Inland Revenue has issued its annual Compliance Focus, outlining areas it intends to concentrate on.

They include:
* The misuse of charitable status, which confers various tax advantages. "We are working with the Charities Commission to identify charities and individuals whose activities warrant investigation."

* The diversion of personal income into trusts or companies to avoid paying full tax. The Supreme Court's Penny and Hooper ruling last year clarified the law.

* Property transactions. "Our focus remains on property speculators and dealers who have not declared income from property transactions or treated it as capital gain."

* Non-resident contractors, who have come to the fore with the Christchurch rebuild. New Zealand outfits which engage them have tax obligations.