Union predicted tax chaos three years ago

10 Sep 2010 11:07 AM

A computer error that led to 1.4 million people receiving a demand for unpaid taxes was predicted by PCS three years ago.

In our submission to the 2007 Treasury select committee the union warned that HM Revenue and Customs was storing up problems for tax payers.

The department has cut 30,000 jobs since HMRC was formed in 2005, resulting in one million pieces of post going unopened and 17 million ‘open cases’ – accounts where there are outstanding queries – not being dealt with.

HMRC sent out letters to 1.4 million people this week telling them they had underpaid their tax and needed to make up the difference because of a very expensive computer error.

The department introduced its new computer system at a cost of about £389 million in spring 2009, using it as an opportunity to justify job cuts, but now it has failed there are no longer the staff to pick up the pieces.

HMRC bosses told MPs on the Treasury select committee that the new system would allow huge savings to be made without any detrimental effect on the service it provided to the public. The union strongly denied this would be the case; with the most likely result being chaos for the taxpaying public.

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.

PCS national officer Pete Lockhart said: “It is time to invest in HMRC people 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.”

Listen to a tax officer describe to BBC Radio 4's Today programme the problems staff face in the under-resourced HMRC