The Inland Revenue Department has awarded an American firm a contract worth up to $1.9 billion to overhaul its tax and computer systems.
However, critics like the Green Party say it's a "missed opportunity" for the New Zealand IT sector after Colorado-based Fast Enterprises, which specialises in government contracts, was given the deal.
The US company will set up an office in Wellington especially for IRD's tax system overhaul, which will take eight years and employ an unknown number of New Zealanders.
Green Party co-leader James Shaw says profits from the contract will flow offshore rather than help to nurture the New Zealand IT trade.
"If we supported the IT industry here now, they could become major export players and in the long term become an important part of the economy."
NZ Rise lobby group spokesman Don Christie says New Zealand companies are concerned.
"No New Zealand companies were allowed to tender for the work because of the way the tender process was run and scoped, it effectively excluded all New Zealand companies taking part."
But, IRD says the system overhaul includes some New Zealand companies, including Xerox, MYOB, Tenzing and Assurity, while there will be more sub-contract work in the future.
Inland Revenue's deputy commissioner for change Greg James says New Zealand companies had received 58% of the services spend on transformation by April this year.
"I think New Zealand companies obviously expect to continue to be involved. We're promoting New Zealand companies where they have the expertise required to deliver us a transformation of this scale and complexity, absolutely."
IRD says the system overhaul will make it easier and quicker for people to pay their taxes.
"Inland Revenue's journey to change is complex and expensive but it has to happen ... This cannot fail and it will not fail," the department says.