The cost of the Inland Revenue Department's ambitious business transformation project has crystalised at at least $1.5 billion, with Opposition MPs warning of a possible blowout.

The long-planned information technology project aims to completely overhaul the country's taxation system and is acknowledged by Revenue Minister Michael Woodhouse as the "single largest transformation project Government's undertaken in history".

Woodhouse yesterday said the project - a centrepiece of yesterday's Budget - was being carefully managed and an essential part of government plans to reduce compliance costs.

But Labour finance spokesman Grant Robertson said the rising cost - he said the Minister for Revenue had recently claimed it could cost as little as $1.3 billion - raised concerns that projects' scale could see it run out of control.


"Our concern is taking this on as one huge project may see another Incis or Novapay: There are danger signs and risks all around this project. It has the potential to blow out enormously."

Finance Minister Bill English said $857 million in new spending would see a 25-year-old tax administration system completely overhauled. Its replacement "embraces new technology to make it easier and less complicated to pay tax".

But the $857 million announcement accounts for barely half of the cost of the project, and does not include funds spent prior to the 2016 financial year, or the intent to reinvest in the project ongoing savings and additional taxation revenue, or spending beyond 2020.

Woodhouse said savings from the project over the next four years were anticipated to amount to $284 million, and it would help collect an additional $280 million in that period.

He was well aware of the project's risks and scale and was taking a close interest in its implementation.

"I test the blood pressure of the project manager most weeks," he said.

Supplementary estimates said Inland Revenue had this year spent $44m more than originally budgeted for on the transformation project, but Woodhouse said this was an issue of making more progress than initially expected rather than any cost blow-out.

"It's a big number, but I'm certain it's a timing difference: We're still on track to stay on target."