Between the lines: Off-track route to online tax filing

Inland Revenue is calling its decision to change the way large employers file PAYE data online an "enhancement."

It's not. It is an attempt to recover from an old-fashioned stuff-up, of the sort which gives Government IT projects a bad name and loads ever more compliance costs on the poor taxpayer.

The previous Government decided that allowing people to file tax returns electronically was a good idea - as indeed it is - and passed a law early in 1998 requiring all firms with annual payroll tax over $100,000 to file their returns by April 1999.

It wasn't until October 1998 that Electronic Data Services (EDS) won the contract to build the new system.

To meet Inland Revenue's requirements for data security and certification of users, EDS bought 50,000 digital certificates from a fledgling Australian company.

The certificates sit on the employer's PC along with an application written in Microsoft's Active X technology, which attaches a signature as the monthly payroll data is sent.

Unfortunately, neither the Inland Revenue Department nor EDS had any experience of digital certificates or certification authorities at the time, so the blind were leading the blind.

Using Active X limited the options for users: trying to run ir-File on a computer without a Microsoft operating system or web browser was next to impossible.

Employers were told they had to accept a system they had no part in designing. Many needed to buy new computer hardware, software and services - and to connect to the internet.

The help desk was a disaster. It was left to payroll software vendors and IT departments to get the code to work - all adding to compliance costs.

Inland Revenue has refused to say how much its first crack at ir-File cost. It is commercially sensitive and subject to confidentiality agreements.

EDS refuses to talk at all, citing client confidentiality. Even the select committee trying to ask questions about the system was stonewalled.

Critics said the certificates chosen would never scale up because the system architecture was all wrong.

Now Inland Revenue seems to be admitting those critics were right, and the pain required to bring smaller employers into the system is unacceptable.

With new management at the top, the department has started work in-house on a replacement.

The digital certificates are going. The Active X is going. In future, users will access the system by typing a password into a web browser and then feed the data in.

Inland Revenue has the chance to redeem itself. But it must be more open with its "customers" than it has been in the past.

It must consult them on how the new system will work. It must avoid non-standard technology.

And it must test and test and test, to ensure users aren't hit with a new set of costs to make the "enhancement" work.