Progress Made on Improving Hawaii’s ‘Revenue Engine’

Continuing tax system modernization must remain atop state’s priority list.

By Christine Sakuda

Honolulu Civil Beat (Community Voice) – Feb. 22, 2018
Original Story: http://www.civilbeat.org/2018/02/progress-made-on-improving-hawaiis-revenue-engine/

Amid news stories about federal government shutdowns and false missile alerts, one the state’s most ambitious modernization initiatives, Tax System Modernization, has not been grabbing headlines. But it is proceeding and, apparently, succeeding, despite its low profile of late.

At the end of March, the door will close on options to file business taxes via the state’s legacy (i.e., old) tax-filing site. But that’s a good thing, since that means those services will have been successfully moved to the state’s new tax filing portal, Hawaii Tax Online.

Over the course of five rollouts, each making new functions available, the majority of tax services have been migrated to Hawaii Tax Online. “Rollout 3” was completed last summer and included services for Corporate Income, Franchise, Public Service Company and Withholding filers. This followed the previous two rollouts that included General Excise, Transient Accommodation and other types of taxes.

Electronic Filing ‘Inevitable’

The flicking of the off-switch for those services on the old site — with little fanfare or controversy — will provide evidence the rollout succeeded.

In fact, thanks to the newly launched electronic filing capability for business filers, the Hawaii Legislature can consider bills like Senate Bill 2822, which authorizes the Department of Taxation to require certain taxpayers to file digital returns exclusively, subject to a few exceptions.

Yes, some business users may be reluctant to go paperless, but such progress is inevitable as electronic filing becomes the norm at both the state and federal levels. In order for this to be successful, the Tax Department has acknowledged it also needs to beef up its help-desk support to prepare for the influx in calls. After all, customer interaction with new technology can be embraced with a little bit of handholding.

Legislators should be applauded for exploring all opportunities to nudge taxpayers toward using the capabilities of the new system. In addition to maximizing the state’s return on investment, business filers over the long-term will realize the cost-efficiencies associated with filing electronically. SB 2822 provides a mechanism for the tax department to encourage those with the best reasons to file electronically to be first users of the system and demonstrate its effectiveness.

Keep Up Momentum

With similar functionality scheduled to “go live” for individual filers during the next rollout, the Tax System Modernization must remain a state priority. Whether the project continues now depends on the approval of the Legislature.

In the governor’s supplemental budget proposal submitted in December, the administration is asking for an additional $16.5 million in capital improvement project funds to cover the completion of the functional requirements scheduled for next fiscal year (FY19) as well as the warranty period (FY20). Transform Hawaii Government supports this request to keep the momentum of the project moving on its current schedule.

The project remains a worthy investment. A modern, effective and efficient state tax collection system is what Hawaii taxpayers — all taxpayers — expect and deserve.

But it is critical that legitimate concerns raised by lawmakers about a range of problems be addressed; otherwise, the Legislature would be justified in withholding the funds as it did during the last legislative session. Going into the 2018 session, the administration must take steps to provide additional reassurance that the project is delivering functionality as intended.

‘Unprecedented Action’

Providing the state chief information officer with greater oversight of technological aspects of the project in July 2017 was a good first step.The CIO took the unprecedented action of publicly posting the project’s Independent Validation and Verification reports, which are quarterly progress assessments by a third-party contractor.

Many of the issues involving the former IVV vendor came to light and were addressed as a result of that direct involvement by the state’s top technology official and his commitment to full transparency. That IVV contract ended as a result.

With greater transparency established and a new tax director in place, the Department of Taxation is now in a position to take back the lead role. I am told that the tax department is working with the CIO’s office to procure a new IVV vendor, which will ensure the continuation of these periodic third-party assessments.

While the project represents an ambitious initiative, it also stands out as one of the most necessary. The project is making progress in giving the state a more robust revenue engine and the technology needed to support it. Ultimately, it is a worthy investment, as a modern tax collection system delivers what Hawaii taxpayers expect and deserve.

Such thoughts are sure to be top of mind as taxpayers file this season.

Transform Hawaii Government was established to promote an open, transparent, and responsive Hawaii government. The nonprofit organization advocates improving government business practices through technology to ensure government employees, residents and businesses have convenient and secure access to reliable information and data on demand.

Our goal is to have government services streamlined, integrated and delivered in ways that exceed the expectations of the public and the needs of Hawaii businesses. For more information, visit transformhawaiigov.org.

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