HMRC has rejected the committee’s view that it is suffering from systemic failure.
HMRC- A case of systematic failure
The Her Majesty’s Revenue and Customs (HMRC) is in the line of fire, for its failure to reduce the fraud and error which will bear a huge bearing on the British tax payer. The HMRC was challenged by the government in 2010 to cut fraud and error to the extent of 8 billion pounds by 2015. However, the HMRC has now predicted that it could achieve only 3 billion pounds, said a report by the Public Accounts Committee. Margaret Hodge, who chairs the PAC, said “The performance of HMRC in cutting down fraud and error in the tax credits system has been hugely disappointing and extremely poor, the department’s failure to cut the fraud and error by 5% has cost the taxpayer dearly”
What is HMRC and what do they do ?
Her Majesty Revenues and Customs ensure adequate finances are available to fund UK’s public services. They help families and individuals with targeted financial support. It is responsible for collecting around 468 billion pounds in the form of taxes mainly from U.K businesses and individuals and uses these funds for public funding such as the national insurance, student loans, tax credits and minimum wages. They perform a very critical activity which impacts every business and individual in Britain and their work is very vital for the well being of the economy. The funds generated from HMRC are used to fund the governments various initiatives and programmes.
A 5 billion deficit in the public purse has been caused by the failure of HMRC to clampdown effectively on fraud and error. British MP’s from the House of Commons have come down heavily for this failure and for achieving less than half of projected possible savings from fraud and error in the payment of tax credits. The HMRC officials were taken to task by the committee for failing to gather evidence from whistleblowers about Google’s sales activities in the U.K. In 2010-11, HMRC lost 2.3 billion pounds due to error and fraud, 850 million more than it was expected to lose, with one on five awards of tax credits thought to have resulted in overpayment. Next year, the officials had written off 1.7 billion debts as uncollectable. Although the committee had increased the checks on individuals from 123,000 to 2 million, it had resulted in only doubling the money saved. The National Audit Office (NAO) said that HMRC was struggling to stop fraud and error recurring after it had corrected a claim and could not cope with claimants misreporting the hours they worked. NAO head Amyas Morse said “The tax credit system is complicated, and HMRC will have to overcome significant challenges if it is going to achieve value for money. HMRC deserves credit for demonstrating innovation, but it needs to work hard to achieve sustainable reductions in tax credits error and fraud “.
An HMRC spokesman said that officials had increased the targeted checks on tax credit claims by more than 10 times in the past four years and saving $ 390 million in key risk areas. He also told that work with the private sector has improved the data used to make the claimant’s information and identify fraudulent claims. The real time information system, starting from 2014 will provide up to date information for tax credit claims, which will reduce fraud and error drastically.