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HMRC claims IT successes

VAT fraudsters still as slippery as eels, though

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HM Revenue and Customs revealed today how joining up its IT systems has contributed to falling costs in the merged departments.

However, the annual report also said losses to missing trader VAT frauds had been creeping up above one of its key targets.

Revenue and Customs' financial accounting systems were merged and their desktop IT systems were integrated over the 04/05 and 05/06 financial years, said the report.

These changes were expected to contribute to targeted job cuts of 12,500. But the department said it couldn't separate the savings it derived from the IT integration from those gained by making process changes.

But it did say how much it had spent: IT costs were £10.3m in 05/06, said the report. The total cost of merging the two departments was £75m.

HMRC systems received and validated over 10,000 returns an hour during its peak period.

The IT systems are vast, with 75,000 users of more than 250 large-scale systems. The report said its IT workers put in 34,800 days a year on infrastructure and support, 43,200 days on application development, and 62,400 days on application integration and testing.

All this helps it get close to its target of all businesses and IT literate individuals filing electronic tax returns by 2012. And it boasted that it managed to complete an upgrade of 1,100 file servers, 110,000 workstations, 120,000 mailboxes, and 750 in-house software applications on time. It also managed this within budget, said the report, with the project cost coming in £14m below the budget of £175m.

On VAT fraud, the annual report says HMRC has: "Substantially resolved the IT issues which were delaying the identification of some VAT debts", while fraud losses were up because of missing trader VAT rings being more active across Europe. It had got the VAT gap down from 15.9 per cent in 02/03 to 11.7 per cent (within 0.7 per cent of its 11 per cent target) in 04/05.

However, it said: "Receipts in 2005-06 were affected by increased attacks on the system from Missing Trader Intra-Community (MTIC) fraud and the VAT gap rose to 14.5 per cent".

In real terms, this meant an increase in missing trader fraud from £3.5bn to £4.75bn.

Furthermore, having been told last April by the Parliamentary Public Accounts Committee that it ought to do something about the tax credit debacle, it "embedded some compliance specialists" in its call centres, and improved its paper processes.

But it failed to mention how last week the very same committee reported how poorly the department had managed to deal with the tax credit debacle.

"The performance of the tax credit computer system has improved significantly. Major new software releases have been introduced delivering improvements in operational performance," the HMRC report said.

"Billions of pounds...are still routinely overpaid to claimants. Very large amounts have to be written off...Changes have been made to the system, but who will be confident that they will make any difference?" said committee chair Edward Leigh last week.

Neither did the HMRC mention how the very same committee had slapped its wrist just last December for letting the costs of its Aspire contract with Capgemini spiral from £3.5bn to £8.5bn. ®

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