Analysis: Technology powers HMRC's efficiency drive. By John Stokdykby
Efficiency improvements and better IT systems have helped to increase the tax take and bond HM Revenue & Customs into a unified organisation, the department claimed in its 2007 departmental report.
Laid before parliament on 17 May, the 84-page report says total receipts for the year were £423 billion, a £25 billion increase in receipts on the previous year. The report also provides newly confirmed chairman Paul Gray an opportunity to boast of recent achievements.
Introducing the document, Gray wrotes: "Revenues are up for the second consecutive year, the tax credit system is working better, we are ahead of schedule on efficiencies and productivity and we have had major successes in detecting and disrupting VAT fraud resulting in much reduced losses from fraudulent activity."
Since the organisation's formation through the merger of the Inland Revenue and HM Customs in April 2005, the department has been set some tough targets by the chancellor to improve its services while operating budgets and staffing levels have been cut. By 31 March 2007, HMRC had cut a net figure of 10,144 full time equivalent posts, four-fifths of its overall target.
The report tots up a technology bill of nearly £350 million over the past two years to support the changes, including a new, merged financial accounting system and an integrated desktop environment with full email access for the department's 75,000 staff. According to Gray the accounting system contributed significant efficiencies and created a feeling of being a single organisation.
Much of the report is taken up with facts and figures documenting how successful many of HMRC's technology investments have been.
"I am pleased with the advances made in development of our online services, including progress towards achieving universal delivery of online business tax returns and greatly increased take up of online filing of Self-Assessment tax returns," Gray wrote.
HMRC continues to be at the forefront of government e-services and by linking internal IT development to the department's overall strategy, computer systems are helping to improve the customer experience, reduce the compliance and administrative burden and ensure the right amount of tax is collected and credits paid out, the report claimed.
"The huge growth in online filing for Self Assessment demonstrates the confidence our customers have in the accessibility and reliability of our online services," it said.
Among the achievements of the past year were an 20% increase in employers filing their annual returns online (1.18 million) and online filing of nearly 3 million self assessment returns - close to a 50% increase on the previous year. More than a third of self assessment returns submitted by 31 January this year were filed on line - with 150,000 ariving in the final 24 hours.
"The work undertaken to increase the capacity and robustness of our IT systems has paid off," the report said, and noted the introduction of a new online attachments service to let agents submit supporting information with the returns they file.
The department still has to continue cutting its operating budget by 5% a year from 2008-09 to 2010-11, but also has a £300 million fund available to fund further organisational improvements.
The achievements are laudable, but this is a report that has been prepared to make the department look good. Drafting tricks include citing the £10.3 million technology cost of the merger early in the report, but leaving the annual IT running costs of £161-£175 million for 2005-06 and 06-07 until later on. It also fails to mention that the costs of its long-term Aspire IT services contract with Capgemini has more than doubled to £8.5bn.
The conclusions of the National Audit Office and of the Treasury subcommittee MPs who scrutinise the department's activities are likely to be somewhat less rosy. Closer inspection of sections on VAT show concerns about the scale of missing trader fraud and continuing problems continue to dog the tax credits system.
HMRC has yet to come up with a figure for the cost of tax credit overpayments in 2006/07, but within days of the departmental report, the BBC quoted a figure of £6 billion for the cost of overpayments since the tax credit scheme was launched in 2003.
A copy of the full report is available from the HMRC website (870kb PDF).