Inland Revenue has paid about $31 million to 526 staff made redundant over three years, as it prepares for a $1 billion IT upgrade.
The figure is revealed in documents released by Parliament's Finance and Expenditure Committee, made up of $18.3m in the 2009-10 financial year, $6.5m in 2010-11, and $6.1m last year.
The cuts come as the department implements a transformation programme expected to include a new IT system that Parliament has been told could cost $1.5b over 10 years.
Green Party co-leader Russel Norman slammed the payments.
"The danger with this Government's cost-cutting focus, is that department managers get brownie points for making people redundant.
"It looks good in the short-term, but if you end up having to contract out, you can end up with a more expensive system.
"It's short-sighted, that would be a concern with such a large redundancy project."
An Inland Revenue spokesperson said the costs included voluntary redundancies offered in the 2009-10 year.
"They also reflect changes made as we look at where and how we deliver services, to make doing business with us easier and more efficient for customers.
"We need to ensure they can deal with us effectively, and we are responding to the changing ways they want to do business, such as online."
Inland Revenue told the select committee its ability to respond to people's changing needs was being constrained by its current systems, and French-based global IT company Capgemini had been appointed to plan the overhaul.
Revenue Minister Peter Dunne won't say how much Capgemini's "commercially sensitive" consultancy contract is worth, but the documents show it has received about $6m up to April 30.
Capgemini's contract for the United Kingdom's Revenue & Custom's IT system was budgeted at about $5b when awarded in 2004, but blew out to more than $15b, which Norman said meant cost monitoring here was essential.
"They do need to upgrade, but it is a question of whether they are going down the right track."
Inland Revenue said it was confident its project would come in on budget, although plans were still being finalised.
The select committee papers also reveal Inland Revenue plans to target up to 250,000 cases with less than $10,000 owed - about half its oldest outstanding debts.
"Additional resources will be applied to proactively target this outstanding debt."
The papers also indicate a plan to work with British authorities to identify student loan debtors, since Inland Revenue says 83 per cent of those 102,632 borrowers are in the UK and Australia, and a "significant portion" had failed to update their addresses.
"Activities to trace and track overseas-based borrowers, which Inland Revenue is undertaking in 2012-13, should assist in enabling us to report on debt levels by country of residence," the department told the committee.
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