Revenue’s staff cuts see it miss out on £1bn

THE TAXMAN would have recouped a further £1.1bn in tax if it had not cut its staff numbers, a Parliament report concludes.

The Commons Public Accounts Committee today published its 87th Report of Session for 2010-2012, describing the the additional £4.32bn taken by the Revenue over the past five years as “an impressive return” on the £387m invested.

According to the report, a further £1.1bn could have been raised had the staff cuts not taken place, representing about £10 in tax lost for every £1 in running costs saved.

HMRC currently employs 26,000 people on compliance and enforcement work, with the ultimate aim of closing the tax gap. According to HMRC’s own figures, there is at least £35bn uncollected tax – 7.9% of all tax due – while other bodies suggest the figure is far greater.

The Revenue has sought to tackle the shortfall through its Compliance and Enforcement Programme, which is designed to target the areas of greatest risk and raise productivity, potentially delivering an extra £4.56bn in tax revenue by 2010/11. In practice, the programme has brought in £4.32bn of tax revenue over the five years to 2010/11.

The taxman expects that the changes introduced will generate a further £8.87bn by 2014/15.

Margaret Hodge, chair of the committee, said HMRC should consider whether further staff cuts would deliver value-for-money for the taxpayer.

She said: “Delays in introducing key technology have led to some of the intended benefits of the programme being postponed or lost altogether. In particular, by delaying its new Caseflow and Spectrum systems, the department [HMRC] has reduced the amount of additional tax likely to be collected by 2014/15 from £743m to £547m.

“However, we welcome the department’s commitment to reinvesting £917m of its efficiency savings between now and 2014/15 with the aim of generating a further £7bn a year in tax revenue.”

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