Taxman under budget by $54m
OPINION: NZ First’s Shane Jones has a few things to prove when he takes the stage in Gisborne on Friday with Prime Minister Jacinda Ardern to launch the Government’s $1 billion a year regional development fund.
At a government level, the announcement of the first tranche of projects – worth perhaps
$70 million in total – will be an important ‘‘proof of life’’ moment for an administration that has spent a lot of time recently talking about what it will do, and announcing the reviews that will inform its eventual actions.
While it can claim legitimately to have fulfilled its 100-day plan, the impact on average and lowincome households is so far only significantly affected by the Families Package, which takes effect in July.
The regional development fund is a down payment on the Government’s intention to be a more active economic participant, seeking both to lead and to partner in the creation of new economic opportunities – especially in depressed regions where the robust national economic statistics are not borne out on the ground. Some will call it interventionism, others a breath of fresh air.
At a party level, the regional development fund is vital to NZ First’s re-election prospects.
This week’s Colmar Brunton poll showed NZ First at
3 per cent support. Unless it can win at least one territorial electorate, that result on election night 2020 would see it out of Parliament.
Party leader Winston Peters lost his Northland electorate last September and is expected to depart as leader before the 2020 election.
Jones, one of Peters’ possible replacements, has never won a territorial electorate, only ever representing first Labour and now NZ First, as a party list MP.
Obviously, a weak showing in a poll now is not a guide to polling day in 2 1⁄2 years, but the electoral clock is ticking and NZ First is focused on the potential for either National or Labour to eat its vote, especially in a post-Peters era.
There is also a personal dimension to Friday’s announcements.
Jones’s regional development, associate economic development and associate transport portfolios are a political gift for a politician who knows his party’s fate hangs on being seen as a vital part of the coalition and not a hanger-on.
He is regarding his ministerial warrants as a licence to smash through what he sees as bureaucratic inertia that has been stifling regional development opportunities, often for years.
Have a look in Friday’s announcements for progress especially on Gisborne, Hawke’s Bay and Northland rail projects, and a new high-value wood processing project in Gisborne.
The role also brings Jones into close contact with Green Party ministers on climate change and conservation policy, especially where forestry and limited investment in water storage – as opposed to large-scale irrigation schemes – is concerned.
At a deeper personal level, Jones is also out to squash the taunts from his political opponents that he doesn’t get stuff done.
Developing and deploying a billion-dollar annual economic development fund in a little over four months since the new Government was formed should be a jab in the eye to his critics.
Economic rationalists will squirm at the risks inherent in bigspending state interventionism, and the Taxpayers’ Union will bray predictably about ‘‘corporate welfare’’.
But in the current political climate, that is only likely to drive the new Government’s popularity among that large section of the public who have had enough of market rationalism and are willing to give activist government a go. The trick for Jones is to make sure that he and his party, not just Labour, get enough of the credit. Inland Revenue commissioner Naomi Ferguson says the tax department is $54 million under budget on its business transformation (BT) project to reshape the tax system.
Ferguson told a select committee that the BT project was on schedule and reiterated projections it would allow Inland Revenue to cut between 25 per cent and 30 per cent of its workforce, which stands at the equivalent of
5478 full-time employees.
But she cautioned big risks still lay ahead as the department ran two different computer systems that would have to ‘‘talk to each other’’ until 2021.
‘‘The transformation is high risk and it will remain high risk right through the programme.’’
Ferguson said the BT project overall was still forecast to cost between $1.5 billion and $1.8b, including contingency funding.
It was $54m under budget on its capital and operating expenditure in December, when compared with what it expected to have spent at this stage of the project, and had not had to dip into any contingency money so far, she said.
One of the curiosities of running two computer systems side by side was that Inland Revenue’s aging First computing system still thought it was responsible for managing GST, even though that was moved on to the new platform last year.
‘‘We will have this co-existence between two systems. It is the area of high risk and increasing risk as we go forward,’’ she told MPs.
The next big test for Inland Revenue will come when it turns on the second stage of its new tax collection system on April 17. ‘‘This weekend we will run a third ‘mock’ go-live,’’ Ferguson said.
One of the changes brought about by stage two is that about
110,000 small businesses with an annual turnover of less than $5m will be able to pay their company tax on a ‘‘pay as you go’’ basis through accounting software services MYOB, Reckon or Xero.
The option, AIM (accounting income method), is an alternative to paying provisional tax.
Although forecasting provisional tax has been a bugbear for businesses, accounting industry sources say relatively few companies appear to be preparing to take advantage of AIM.
Ferguson said it was too early to tell that, but she believed its popularity would grow over time.
‘‘We are out doing a series of roadshows across the country and webinars, working with tax agents and businesses to help them understand what needs to change and the opportunities there are.’’
Ferguson said it was a ‘‘pretty tough time’’ for staff as the department and its systems changed, but turnover remained unchanged at about 11 per cent a year.
Inland Revenue had been increasingly hiring people on twoyear fixed-term contracts knowing that its workforce would be smaller, she said.
At a deeper personal level, Shane Jones is also out to squash the taunts from his political opponents that he doesn’t get stuff done.