Inland Revenue has shed 1000 jobs since starting its $1.7b transformation project
Friday, 18 September 2020
Inland Revenue’s Business Transformation project is entering the home straight without blowing its $1.7 billion budget and with more than 1000 fewer staff than it used to employ.
The broader change programme has not been without its controversies.
“Inland Revenue may view mass redundancies as a success story, but we don’t,” Public Service Association national secretary Kerry Davies says.
It is understood that one of the union’s concerns has been that senior staff have had to be reassigned to answer phone calls as the demand on IR’s helpdesk ballooned at times during the project.
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“The retention and upskilling of tax specialists to conduct complex investigations and ensure effective compliance is a fundamental component of any good tax system.
“In this regard, the Business Transformation project failed,” Davies said.
Gripes have included IR’s decision to outsource helpdesk workers to contractors on contracts that raised what employment lawyer Barbara Buckett described as “legally dubious” and its use of psychometric testing.
IR deputy commissioner of transformation Greg James rejected the union’s criticisms.
“There has been no failure to upskill people at Inland Revenue.
“In the investigations area, the use of technology and data is dramatically improving our ability to identify suspicious transactions and hold offenders and potential offenders to account,” he said.
“Our move to broad based roles gives our people more flexibility, the opportunity to acquire new skills and to develop in their chosen directions.”
The final pieces of the Business Transformation puzzle won’t be in place until October next year, after the department chose to split up the remaining work into two streams because of Covid-19.
James says they will include an overhaul of child support, a new look-and-feel for IR’s online services, and the department finally pulling the plug on its ageing mainframe computers.
The child support update will mean parents will be able to see their balances online more easily and will be able to log on to see when their next payment is due.
“Social” programmes such child support, parental leave and Working for Families either have or will be better integrated with the tax system reducing the risk of over or under-payments that need to be reversed later.
The Government has been able to release $160m in “contingency funding” that had been earmarked to pay for overruns as confidence in the project costings has increased, James said.
But still in doubt is whether the financial benefits of the transformation programme will be as high as forecast.
Auditor-general John Ryan has started asking whether the whole exercise will have been worth it, indicating that at the moment the jury is still out.
In an August report, Ryan said such “significant programmes of change” had a poor track record for fully realising their proposed benefits in New Zealand and elsewhere.
IR appeared well-positioned to buck that trend, but the expected financial benefits of the project had not yet been banked, he said.
The transformation programme had increased Crown revenues by $90m and cut $60m off IR’s administrative costs by the end of June last year, he said.
Those savings should continue to add up, in part because IR now employs 4654 full-time equivalent staff, down from 5680 before the project began in 2015.
Ryan said the project had also cut the amount of time small businesses spent on tax administration by an average of nine hours each year.
Although the progress was “positive, and largely on track with expectations at this point of the programme”, the gap between benefits achieved and those forecast by June 2024 was significant, he said.
IR has been targeting $2.9b in accumulated extra revenue and $495m in accumulated cost savings by then, by when it also aims to be saving the average small business 18 hours a year.
“We will not be able to say with certainty that the significant investment in the programme represents value for money until the benefits from the completed project are measured,” Ryan said.
The transformation project has delivered benefits for personal taxpayers also, including more accurate taxation through the year and the automatic refund of tax credits.
Some smaller improvements may have passed by largely unnoticed.
As an example, James says three-quarters of employers’ contributions to KiwiSaver are now deposited into people’s accounts within seven days.
Prior to April, before release four of its transformation programme, transfers had typically taken three weeks.
The faster flow of funds into KiwiSaver accounts may have masked some of the drop in people’s retirement savings that followed the Covid downturn.
James says some initiatives that the Government has put in place to cushion the economy from the impact of Covid would not have been possible without the programme.
The Government’s Small Business Cashflow Scheme which has seen IR advance about $1.6b in zero and low interests loans to small businesses was “39 days from idea to delivery”, he said.
That could not have been achieved within its ageing First computer system which was “hellishly expensive” and time-consuming to program, he said.
In contrast, implementing new initiatives in its new Start system is really fast, he said.
“The system is not going to be the constraint any more, but the time needed to prepare the customer base for changes.
“With Covid, we have worked out we can change legislation quickly as well.”
Ironically, that may mean the shrinkage in IR’s workforce becomes self-limiting.
IR had originally forecast it would shed about 1500 jobs as a result of the transformation programme, but “the big unknown” was what impact extra work triggered by Covid would have on that expectation, James said.
Correction: An earlier version of this story incorrectly stated that IR’s goal was to save small businesses 18 hours a week in time savings.