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HMRC computer system is costly for taxpayers

7 September 2010

HM Revenue and Customs (HMRC) is sending out letters to 1.4 million people from today telling them they have underpaid their tax and need to make up the difference because of a very expensive computer error.

 

HMRC introduced its new computer system at a cost of about £389 million in spring 2009, using it as an opportunity to justify massive job cuts – 30,000 staff have gone in a five-year period – but now it has failed there are no longer the staff to pick up the pieces.


Nearly six million people across the UK are to be told over the next few months that they have paid the wrong amount of tax collected through the pay as you earn (PAYE) system.


More than 40 million calls, almost half of all those to HMRC enquiry centres, went unanswered last year because the department does not have enough staff. With cuts of at least 25% expected through the government’s draconian budget and spending review it is hard to envisage the situation for taxpayers getting any better.


There is an alternative; tens of billions of pounds of extra revenue could come by collecting the tax that is owed. Tackling the tax gap, which now stands at more than £120 billion a year would help to plug the hole in the public finances.


It is time to invest in HMRC people, not computers, and create jobs to collect the £25 billion a year lost through tax avoidance, £28 billion uncollected because of a lack of resources in HMRC, and £70 billion evaded by some very wealthy and powerful individuals and organisations.