All is far from well with the Inland Revenue Department,
writes Labour's revenue spokesman, David Clark.
I'm not often given to being in wild agreement with Prime
Minister John Key, but he said something earlier this year
that I thought was absolutely on the button.
He was speaking about the Inland Revenue Department (IRD),
and he said "you don't want to be in a position where
Parliament is held hostage to a lack of technology". What was
he on about?
Well, he was referring to IRD's information technology
abilities, or lack thereof.
Put plainly and simply: all is not well in the world of tax.
The Inland Revenue Department is a department under pressure.
Recent evidence shows it is struggling to keep up. At last
count, it had more than one million unprocessed returns; it
has about $7 billion in outstanding tax not yet collected;
70,000 calls went unanswered in the two weeks prior to the
July GST filing period; and voluntary compliance is dropping.
It is no wonder customer satisfaction surveys show taxpayers
are less happy than they used to be with the service at IRD.
Call centre workers in the department's Wellington base are
also voting with their feet; turnover is about 34%. They
quickly grow tired of the preventable frustrations of a
general public who expect better from their tax department.
The Minister of Revenue, Peter Dunne, has been aware the
system needed upgrading for many many years. Built in 1992,
it predates Google and is 10 years older than Facebook.
Collection of our taxes is dependent upon museum-grade
technology. Those who have worked there say the system is
held together with adhesive tape.
The department is rumoured to have spent $30 million on
consultants, but is unable to yet provide a credible plan and
timeline for replacing the system.
So what to do?
My challenge as revenue spokesperson is to keep banging the
drum for change. Hence this article. The prime minister was
right to point out that Parliament should not be held hostage
to a lack of technology. But it is being held hostage.
Or at least it would be if Parliament were to vote for a
significant change to the tax system.
The IRD hasn't been much challenged by National's changes;
there have been some simple tweaks in the rates so Mr Key
could deliver tax cuts to those on high incomes while those
on low incomes got nothing. Unfair, for sure, but not too
hard for the IRD system to handle.
However, should Labour be elected to office two years from
now, then there will be significant change, in the form of a
Capital Gains Tax (CGT), the design of which will see
wealthier folk paying, on average, a little more.
But that isn't the real point of a CGT. The real point is to
ensure that a dollar invested in a house or farm is treated
equally to a dollar invested in, say, manufacturing. At
present, the tax system subsidises house and farm investment
which is why we have price bubbles that see young farmers and
young homeowners alike shut out of the market and
manufacturing struggling to get enough investment.
The question is, can IRD handle that change should Parliament
pass it? Maybe not.
If it cannot, we have a constitutional issue of consequence.
In the meantime, resources in the tax department are
stretched. More and more mistakes are being made.
In the past year, Inland Revenue released more than 6300
people's private details in a series of privacy breaches.
Updating the IRD computer system should not be that hard. We
can learn from others. After all, we are not the only country
in the Western World with a tax system.
So it is beholden on Mr Dunne to take some decisions, find
the time and the cash and get one of New Zealand's most
critical bits of technology updated.
The next Labour-led government has some rather far-reaching
plans. We want pro-growth tax reform, universal savings,
tools to tackle the exchange rate, a plan for the housing
crisis, policies directed at childhood poverty, a technology
focus for economic development and more. We are absolutely
entitled to expect this Government to keep the core state
sector in a reasonable shape to deliver those changes if that
is what New Zealanders decide they want.
- Dr Clark is the MP for Dunedin North.