The tax authorities must crack down on late payers, a powerful committee of MPs will say today in criticising HM Revenue and Customs (HMRC) for the enormous sums owed by businesses and individuals.
Nearly one person in three pays taxes late, according to the report from the Public Accounts Committee (PAC), which condemns HMRC for failing to collect billions in tax.
About £17 billion was owed to HMRC in taxes, interest and fines at the end of March 2008, with £4.5 billion outstanding for more than a year. The number of cases of unpaid taxes rose by nearly a quarter in 2007-08.
The committee lambasts HMRC for being slow to use techniques used by other government departments to manage their debts. It highlights the antiquated computer systems that do not allow the Revenue to determine if those failing to pay one type of tax on time are late in paying other taxes.
The Revenue “does not follow good practice in measuring the amount of debt collected within 30 or 90 days”, the committee’s report says.
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The damning report echoes the criticisms levelled by the National Audit Office late last year, which said that HMRC had failed to meet its targets to cut the amount of uncollected tax.
Burgeoning tax debts will come as a further blow to the Government, which is already feeling the pain as overall tax receipts drop because of the economic slump. Income tax receipts fell by nearly 14 per cent in April, while the income from corporation tax fell by more than a quarter, official figures show.
Edward Leigh, the chairman of the Public Accounts Committee, said: “The department must try every means it can to tackle what is likely to become a growing problem of tax debt, while making allowance for people and businesses in temporary financial difficulty.”
More than 141,000 businesses have been allowed to defer paying their taxes under the “Business Payment support system” since November last year. The scheme puts further pressure on HMRC to chase taxpayers who can afford to pay their taxes on time.
An HMRC spokesman said that the report did not reflect current HMRC debt activity. “Things have moved quickly since last year and HMRC has made even further progress since the PAC held its hearing and the detailed NAO report. We have reduced the amount of tax debt as a proportion of net tax receipts on most taxes,” he said.