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New Tax System: Targets Cash Economy

Wayne Yoshioka

The State crossed a major milestone this month in its effort to improve tax collections and investigate fraud.

Credit Wayne Yoshioka
Linda Chu Takayama briefed lawmakers last year on status of Tax System Modernization (TSM)

The state’s Tax System Modernization or TSM will cost $60 million when completed.   Rollout 4 was launched earlier this month to enable electronic filing for individual income tax returns.  Linda Chu Takayama, who took over as Department of Taxation director last year, says the information technology upgrade will help to track who is paying taxes and who is not.

“We are paying particular attention to a cash-only economy.  Folks like the swap meet sellers and others who only take cash.  We’re also taking a look at folks that are renting out transient accommodation vacation rentals and maybe aren’t reporting as they should or maybe not reporting at all. These are the folks that we are gonna be going after.”

The legislature funded for 5 additional investigation and fraud positions last session plus up to 2 million dollars in annual expenses. The off-the-shelf technology upgrade is used by other states and also provides online identity theft countermeasures. The department’s Technical Services Manager is Rona Suzuki.

Credit Wayne Yoshioka
Department of Taxation Technical Services Manager, Rona Suzuki

“Seven-hundred thousand taxpayers pay individual income. We had to bring over old data as well. So, we have total data sets about 2 million taxpayers.”

Suzuki says the software is used for all aspects of tax system processing including registration, collections and audits.  It also provides quick and accurate data analysis, previously done manually.

“All the taxpayer data, return data, all the information we get from the IRS, we have a large data set with information about you and me and of every business in the state of Hawai’i. So we can compare W-2 information with your earning information and then determine if you  fully reported on your W-2s, for example.  And, so, then we could enforce the income requirements, right?”

The Department of Taxation collects 7 billion dollars in annual revenues for the state and expects to collect about 14 million more this year.  Director Chu-Takayama says the system upgrade is on time and on budget with the last phase of the project due in July.

“The next and final rollout is Rollout 5.  And that will include some smaller tax categories like fuel, tobacco, you know, those kinds of categories that really don’t affect individuals so much.”

For HPR News, I’m Wayne Yoshioka. 

Wayne Yoshioka
Wayne Yoshioka is an award-winning journalist who has worked in television, print and radio in Hawaiʻi. He also has been on both sides of politics as a state departmental appointee and political/government reporter. He covered Hurricane Iwa (1982) as a TV reporter; was the State Department of Defense/Civil Defense spokesperson for Hurricane Iniki (1992); and, commanded a public affairs detachment in Afghanistan (2006). He has a master's degree in Communication from the University of Hawaiʻi at Mānoa and is a decorated combat veteran (Legion of Merit, Bronze Star and 22 other commendation/service medals). He resides in Honolulu.
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