Taxman binges $225m on advisors

NEIL REID
Last updated 08:29 02/03/2014

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The taxman has spent more than $225 million on consultants over the past five years, documents reveal.

That includes $52m in the past financial year as the department continues with an IT project estimated to cost at least $1 billion.

A 218-page document contained in a Parliamentary financial review of the department has revealed its total spending on contractors over the past five years is $225m.

Inland Revenue defended the growing use of contractors, saying it "takes very seriously its responsibility to using taxpayer funds carefully".

"Prudent use of the services of consultants and contractors is a cost-effective way to procure certain services," a spokesperson said. "This is because it is often unnecessary or undesirable to maintain fulltime permanent positions for the tasks performed by external consultants, and contractors."

But Green Party MP Denise Roche - who provided the Star-Times with the document - said the soaring contract bill was of huge concern. "The IRD has been restructuring and dismissing many of its hard-working staff over the last few years," she said.

"To discover it is at the same time spending tens of millions of dollars on outside contractors is therefore reason to be concerned."

Jordan Williams, executive director of the Taxpayers' Union lobby group, also blasted the spending.

He said the IRD required the $1b IT upgrade as a by-product of the nation's "convoluted" tax system.

"The facts are if you have a simple, less complex tax system you don't require a $1b computer system to run it," Williams said. "That consultancy [cost], if ever there was an argument for a fairer, simpler tax system, it is that."

French IT company Capgemini is the recipient of the three of the four biggest payments to contractors over the past year; the company previously secured the contract to lead the IT transformation programme. In the past financial year it received total payments of $12.4m. Ernst & Young also received a payment for $5.7m for "strategic sourcing consultancy services" regarding the transformation project.

"So far what has been achieved by bringing in Capgemini is opaque," Roche said. "The IRD seems intent on doing its best to not only outsource but wherever possible, outsource to overseas."

Inland Revenue said it was committed to having as many Kiwi providers involved in the programme as possible but in some instances had to look overseas.

"In procuring services, our responsibility is to ensure that providers can supply the very best services representing the best value for money for the NZ taxpayer," the spokesperson said.

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"Inland Revenue will always endeavour to make sure New Zealand suppliers are aware of the opportunities to work with us, however the full set of capabilities as well as the capacity to assist in the delivery of some Inland Revenue programmes may not exist in New Zealand."

Inland Revenue has spent more than $39.5m on redundancy payments, severance or other termination payments over the past four financial years.

Last year, 90 staff left with redundancy, severance or other termination packages. That compares with 156 in 2011-12, 99 in 2010-11 and 312 in 2009-10.

Inland Revenue said it was "possible" some of those whose roles had been made redundant had been rehired as contractors.

"It is possible that there could be cases of ex-employees who have been directly or indirectly engaged as consultants and contractors. This is because the contractual arrangement is through companies rather than directly with the individuals."

Roche said a greater reliance on consultants was responsible for a "climate of fear" for some staff, and considerable cost.

"The lesson of the 90s was that whenever good staff are dismissed they often need to be rehired at a much costlier rate," she said.

Considering the sizeable spending on the IT project, Roche said, New Zealanders should be demanding a first-class future service from Inland Revenue.

"New Zealanders should expect that the IRD learns from the costly mistakes of the past such as Incis and Novopay when moving forward in its IT transformation projects," she said.

But the department said on Friday: "Inland Revenue continues to closely monitor each part of the business transformation programme to ensure value for New Zealanders."

"Very extensive" external auditing and probity processes were in place to ensure the programme was well managed and governed.

- Sunday Star Times

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