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MPs have lambasted the Revenue for its ineffectual approach to recovering tax debts, which has led to more than £17 billion being owed to the department.
Nearly a third of all tax payments are late, according to a new report from the Parliamentary Committee of Public Accounts, which also shows that the number of tax debts increased by 22% during 2007-08, when 30% of tax payments were made after their due date.
The document censures HMRC for not using ‘recognised good practices in debt management’ and for failing to explore ‘all the payment methods [they] might offer to taxpayers to settle… tax liabilities’.
It also highlights ‘deficiencies [that] are major barriers to effective and efficient debt management’. These include the taxman’s decision, for reasons of cost, to not develop a new IT system that links taxpayer records on different taxes.
‘Linking of debts is crucial to effective debt management and HMRC should introduce a staged programme towards that end,’ remarked the committee’s chairman, Edward Leigh MP, who said that the Revenue ‘has been slow to take advantage of the key techniques used by other organisations to manage debt owed to them’.
Mr Leigh acknowledged that department ‘has started to make more methods of payment available to taxpayers’, but he added that the taxman ‘could take advantage of the latest developments in payment technology’ to recoup £17.3 billion of overdue taxes.
The Committee of Public Accounts’ report makes a number of other criticisms of the Revenue’s tax-collecting methods, including:
- ‘The department does not follow good practice in measuring the amount of debt collected within 30 and 90 days.’
- ‘The department’s debt management system cannot provide… information routinely.’
- ‘The department cannot measure the cost effectiveness of different collection activities, because it does not know how much debt is collected through each activity.’
The document does, however, praise HMRC for offering backing, via the Business Payment Support Service, for firms in financial difficulty during the recession – and it goes on to suggest that ‘the arrangements to support taxpayers during the recession may be needed for some time’.
