Inland Revenue mulls Rod Drury's proposal
Inland Revenue has responded guardedly to a call from Xero founder Rod Drury for it to use a "public-private partnership" to replace its computer systems.
Spokeswoman Lorna Milton said considerations included taxpayers' privacy and the "integrity of the tax system".
The department warned in 2012 that it might cost up to $1.5 billion to replace its ageing mainframe-based First computer system.
Drury said Inland Revenue could save "hundreds of millions" if it just published the tax rules, maintained a computer that could collect tax payments, and left the rest to private-sector businesses such as Xero.
That would not mean everyone would need to pay to use Xero's cloud-based service, or those of its rivals, he said.
Instead, Xero and other software companies could offer a free service that would let taxpayers key in any information needed for tax returns into online forms and would process that for no charge as part of a broader, non-exclusive partnership, he said.
"The private sector could do the 'heavy lifting'. Inland Revenue doesn't really need to build all the complex rules any more; all they need to do is be a transaction system that receives money and publishes the rules and the private sector is more than happy to invest in building the online returns."
Milton said Inland Revenue saw opportunities to integrate Inland Revenue's systems with third-party software applications "to allow tax agents and software providers to carry out some services that Inland Revenue currently provides".
But she said there were several factors to consider, "particularly taxpayers' privacy and security, the accuracy of information, maintaining the integrity of the tax system and how our core systems interact with third parties".
"Designing and delivering the new revenue system in a way that simplifies tax and reduces taxpayers' compliance burden is an absolute priority for Inland Revenue," she added.
Drury believed his proposal was still being considered by Inland Revenue.
"No-one has said it is a dumb idea yet."
But this was not being reflected in the language the department was using to discuss its business transformation programme, he said.
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