TaxAdministrationCaution advised in tax body merger.

Caution advised in tax body merger.

The confirmation last week that a merger between the Inland Revenue and Customs & Excise is now officially an option is by no means a new idea in Whitehall.

Indeed William Gladstone first considered such a merger as far back as 1862, while more recently, in 1972, the Revenue was given the option of taking on Customs’ VAT duties, but decided against it.

Tax experts generally agree that, in theory, a single tax gathering body is a good idea, but are edgy about the practical implementation of such a strategy, given the embarrassment over the Revenue’s tax credits fiasco and numerous fraud investigations disasters at Customs.

Such problems have seen Revenue boss Sir Nick Montagu and Customs chief Sir Richard Broadbent face parliamentary grillings and harsh criticism in the press.

If a merger is on the cards, John Whiting, tax partner at PricewaterhouseCoopers, believes everything must be done to ensure customer service is not further compromised. ‘The question is how practical is this merger, and can it be done without affecting customer service?’ asks Whiting.

Richard Mannion, head of tax at Solomon Hare, shares a similar concern – that customer service must be the number one priority. ‘At the moment, customer services (at the Revenue and Customs) is on the floor. What will happen if you take your eye off the ball for two years for this merger?’ Mannion asks.

Both Mannion and Whiting share the view that Customs should be divided into two parts, roughly a ‘tax arm’ and an ‘enforcement arm’. The tax division should then merge into the Revenue to create a general tax collection body, while the enforcement side should be hived off as a separate authority.

A merged body would also need to ensure that IT systems are compatible. ‘IT systems are absolutely crucial to any organisation merging,’ says Whiting, while Mannion fears that taking on a merger now, ‘while the ship is rocking’, could compromise the good work already being done on the Inland Revenue’s IT systems by contractors.

ACCA’s head of tax, Chas Roy Chowdhury, says a merger must set realistic and achievable objectives: ‘We must merge like with like and ensure an easy fit.’

The Revenue, for its part, says no decisions have yet been taken, but that ‘decisions on any particular idea will be made on the basis of the merits of the case’.

Email Larry_Schlesinger@vnu.co.uk The tax page returns next month. Next week: business recovery. For breaking finance news and to sign up for weekly practice and business newswires, go to www.accountancyage.com.

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