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5d ago

MPs Criticize HMRC for Rising Costs, Falling Productivity, and Outdated Systems

A new PAC report highlights inefficiencies, declining taxpayer trust, and calls for urgent modernization, including AI adoption, as HMRC defends its cost-effectiveness.

image: ©Alphotographic | iStock
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Caption: A sharp intake of breath accompanies the arrival of a brown HMRC letter on the doormat. MPs say it need to modernise (Photo by Peter Dazeley/Getty)
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Overview

  • The cost of tax collection by HMRC rose by £563 million between 2019-20 and 2023-24, while compliance productivity dropped from £1.4 million to £1.27 million per staff member.
  • MPs criticized HMRC's reliance on outdated systems, with 70% of correspondence still conducted by post, and labeled the agency a 'lumbering dinosaur.'
  • The Making Tax Digital initiative has added £300 million in costs for VAT-paying businesses and is expected to impose an additional £200 million on self-assessment taxpayers next year.
  • Customer service levels have deteriorated, with helpline wait times exceeding 23 minutes on average in 2023-24, as frontline staff cuts coincided with a £100 million increase in senior staff salaries.
  • The PAC urged HMRC to accelerate IT modernization and explore AI integration to improve efficiency, while warning that legacy systems could increase vulnerability to misuse by bad actors.