Tuesday, February 07, 2006

Revenue Admits Losing £2.8bn pa

Tyler has always been extraordinary honest in completing tax returns. Not for any high ethical reasons you understand, but simply because of fear. I imagined the Revenue would surely have access to all my financial details anyway, so a few simple cross-checks would swiftly uncover any deception. Unlimited fines and a certain end to future employability would follow.

I now realise I've been far too pernickety. According to today's Public Accounts Committee report on income tax self-filing, 32% of such returns contain errors, most of which go uncorrected. On their own estimate- almost certainly understated on the Rummie "known unknowns" basis- they lose us £2.8bn pa. Wish I'd known that before.

As usual, the PAC report is a bit of a jaw-dropper:

"In July 2005 around 1.1 million returns were overdue, some 240,000 taxpayers had two or more tax returns outstanding, and 10,000 had six returns outstanding."

Six years of returns unfiled, so er...why aren't they in jail?

"...staff often lack the knowledge to deal with enquiries. Callers have also experienced difficulties in getting through to the Department’s help lines... e-filing service did not operate properly... errors in processing nearly 500,000 returns, leading to £65 million of undercharges and £30 million overcharges... two million Pay As You Earn coding errors with an accuracy rate of 73%... wrongfully imposed automatic penalties for late filing on 30,000 taxpayers... Department does not know how much compensation it has paid to those affected by its errors and cannot provide any estimate of this figure..."

Now if that all sounds grimly familiar, that's because it is. First, almost identical criticisms apply to virtually all government departments- see for example the PAC's report on the DWP shambles, or the National Audit Office's report on the Home Office fiasco.

And second, the PAC have made many of these very same criticisms of the Revenue before. When they last looked at self-assessment in 2002, they "recommended improvements in the way the Department uses, and assesses the effectiveness of, its sanctions to encourage filing on time". Yet now, four years later, "the Department accepts that it still needs better information to assess the effectiveness of penalties in changing taxpayer behaviour"

In 2004 PAC went even further, when "they recommended that the Department should make maximum use of other departments’ records to find taxpayers it cannot trace and seek a legal power to require taxpayers to provide up to date contact details". Pretty much what I imagined they'd been doing all along...yet still not implemented.

It's amazing any member of the PAC still has a full head of hair: they are constantly recommending improvements to departments, that the departments then steadfastly ignore.

Anyway, it's all given me a few ideas for my next tax return.

Pic: the brunchma cartoon shows this is not just a UK problem: complex tax systems make for expense, error and fraud: simple as.

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