02.08.2000 - By ADAM GIFFORD

Inland Revenue is abandoning its controversial and clunky ir-File system for online filing of payroll records, less than two years after it was implemented.

Introduced in early 1999, the system was criticised for its old technology and its failure to perform to the expectations that the Inland Revenue raised.

ir-File was compulsory for employers with more than 100 staff, and required them to input their data through a personal computer containing a special application and a digital certificate which would be recognised by the IRD system.

Once the 12,000 large employers were online, IRD promised to extend access to smaller firms.

When it was introduced, firms complained the software would not work on Apple Macintoshes and other computers running non-Microsoft operating systems.

Even on Windows PCs, many firms could not make the application work, and people using Netscape browsers had to download a plug-in.

"When we went live, too many employers had difficulty registering and a lot of that was round the technology used to manage the digital certificates," said Bryre Patchell, manager of the business direct unit.

"We don't want to market it to more employers, because some would have similar problems."

Mr Patchell said all large employers required to use the system "are using it with no problems," and enhancements were made to allow it to work on Macs.

He said Electronic Data Systems (EDS), which developed the ir-File system, would continue to supply it to existing customers until they were moved on to a replacement, web-based system being developed with Inland Revenue.

The new system has a Javascript and HTML front end, with the back end written in Java on an Oracle database running on Unix.

Mr Patchell refused to say how much EDS was paid to develop ir-File, as it was covered by confidentiality agreements. The replacement is budgeted to cost $4.7 million, including software licence fees and maintenance for the first year.

He said replacing the system was not the same as dumping it. "It's a normal enhancement to the service. The enhanced service will have the same look and feel but it will not ask employers to load application software on to the desktop."

The new system will use the same 128-bit encryption used for online banking, and will be accessed through a web browser.

Mr Patchell said a pilot was being set up with 40 employers, who would send dummy schedules to test the software.

"We're not going at this like a bull at a gate. We're not expecting to do conversion for existing users until after Christmas. Once they've been brought across, we will market it to the 170,000 employers out there."

He expects about 40 per cent of employers to opt to file online. Mr Patchell said that when EDS was asked to develop ir-File, IRD staff were busy changing internal systems to cope with other changes. The department now had the capacity to do the work itself.

"We want to move to internet filing for more than PAYE in future, so we looked at whether it was strategically appropriate for IRD to own and operate its own e-business platform," he said.

Act tax spokesman Rodney Hide said ir-File was very much the baby of Peter Barrand, the IRD's deputy commissioner in charge of operations, who has since resigned.

"With him gone, we'll be able to take a fresh look."

02.08.2000 - By ADAM GIFFORD

Inland Revenue is calling its decision to change the way large employers file PAYE data online an "enhancement."

It's not. It is an attempt to recover from an old-fashioned stuff-up, of the sort which gives Government IT projects a bad name and loads ever more compliance costs on the poor taxpayer.

The previous Government decided that allowing people to file tax returns electronically was a good idea - as indeed it is - and passed a law early in 1998 requiring all firms with annual payroll tax over $100,000 to file their returns by April 1999.

It wasn't until October 1998 that Electronic Data Services (EDS) won the contract to build the new system.

To meet Inland Revenue's requirements for data security and certification of users, EDS bought 50,000 digital certificates from a fledgling Australian company.

The certificates sit on the employer's PC along with an application written in Microsoft's Active X technology, which attaches a signature as the monthly payroll data is sent.

Unfortunately, neither the Inland Revenue Department nor EDS had any experience of digital certificates or certification authorities at the time, so the blind were leading the blind.

Using Active X limited the options for users: trying to run ir-File on a computer without a Microsoft operating system or web browser was next to impossible.

Employers were told they had to accept a system they had no part in designing. Many needed to buy new computer hardware, software and services - and to connect to the internet.

The help desk was a disaster. It was left to payroll software vendors and IT departments to get the code to work - all adding to compliance costs.

Inland Revenue has refused to say how much its first crack at ir-File cost. It is commercially sensitive and subject to confidentiality agreements.

EDS refuses to talk at all, citing client confidentiality. Even the select committee trying to ask questions about the system was stonewalled.

Critics said the certificates chosen would never scale up because the system architecture was all wrong.

Now Inland Revenue seems to be admitting those critics were right, and the pain required to bring smaller employers into the system is unacceptable.

With new management at the top, the department has started work in-house on a replacement.

The digital certificates are going. The Active X is going. In future, users will access the system by typing a password into a web browser and then feed the data in.