Streamlining HMRC with AI: An Urgently Needed Facelift
MPs Critique HMRC as a 'Sluggish Dinosaur,' Urging Tax Agency to Embrace Artificial Intelligence
MPs are lobbying HMRC to hop on the AI bandwagon, aiming to modernize productivity that's been deemed as outdated. A grim report by the Public Accounts Committee (PAC) reveals a whopping £563 million increase in tax collection costs between 2019-20 and 2023-24.
The same period also brought a 15% spike in tax collection costs for corporation tax, VAT, and income tax self-assessment, coinciding with an increase in tax revenues. The report warns that HMRC's customer service is on the decline due to excessive reliance on post that's slow, costly, and inconvenient.
A Growing Tax Burden
As the tax system grows increasingly intricate, more people are finding themselves filing tax returns. This is a direct consequence of the frozen thresholds and escalating wages. Simultaneously, there have been 240 tax policy changes over the span of 2022 to 2024, estimated to impose an additional £875 million on HMRC, with businesses bearing a £913 million cost.
Despite employing more senior staff and increasing salary costs by £100 million, compliance productivity is waning. Returns per compliance worker have plunged from over £1.4 million in 2019 to £1.27 million in 2023.
The report recommends HMRC publicly outline plans to simplify the complex tax system and report on the implications for their and taxpayers' costs.
AI: The Key to Modernization
Making Tax Digital attempts not only to generate revenue but also to transform services, but they come with a hefty price – hundreds of millions for the taxpayer. As it stands, 69% of all customer interactions with HMRC are digital, but the excessive use of postal communication discourages customers from embracing digital services.
MPs are urging HMRC to present a timeline for modernizing IT systems within three months following the publication of the spending review. In addition, they call for finding ways to reduce unnecessary communication. The report also highlights that outdated technology may leave HMRC vulnerable to AI attacks, suggesting the implementation of AI to enhance productivity instead.
Last month, the government announced HMRC's plans to pilot voice recognition software within customer services this year. Leveraging AI presents a lucrative opportunity for HMRC to boost productivity, combat complex tax rules, enhance customer service, and stay ahead of non-compliance efforts. The time to modernize is now.
Refs:[1]: Parliament UK - Public Accounts Committee (PAC) Report: HMRC Annual Report and Accounts 2022 to 2023[2]: Parliament UK - Public Accounts Committee (PAC) Report: HMRC Annual Report and Accounts 2021 to 2022[3]: Parliament UK - Public Accounts Committee (PAC) Report: HMRC Tax Administration and Management 2020 to 2021[4]: House of Commons Library - Personal tax: Overview
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Roadblocks to HMRC's AI Adventure
The report found that HMRC's customer service processes are outdated, a primary contributor to declining trust among taxpayers. In its previous report, PAC pointed out that average call waiting times reached record levels and exceeded 23 minutes in 2023/24, up from 16 minutes 24 seconds in 2022/23.
Sir Geoffrey Clifton-Brown MP, Chair of the Committee, expressed frustration with the reliance on snail-mailed communication. "Customers are forced to engage with an authority that is frankly a lumbering dinosaur," he stated.
HMRC had admitted in 2020 that the risk in their systems was significant, but progress has been delayed with further updates dependent on future spending reviews. Despite the transition to Making Tax Digital, the report found that HMRC had 'allowed' its legacy IT systems to 'become out of date.'
PAC is calling on HMRC to lay out its schedule for improving IT systems within three months after the spending review, along with a plan to minimize excessive paper correspondence.
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- MPs have warned that HMRC's outdated customer service processes, reliant on slow, costly, and inconvenient post, are a primary reason for declining trust among taxpayers.
- The report by the Public Accounts Committee (PAC) revealed an increase in tax collection costs, especially for corporation tax, VAT, and income tax self-assessment, with a spike of 15% between 2019-20 and 2023-24.
- As a solution to modernize productivity, MPs are urging HMRC to present a timeline for modernizing IT systems within three months following the publication of the spending review and find ways to reduce unnecessary communication.
- The implementation of AI in HMRC could boost productivity, combat complex tax rules, enhance customer service, and help combat non-compliance efforts, according to the report.
- Despite the transition to Making Tax Digital, the report found that HMRC had 'allowed' its legacy IT systems to 'become out of date,' and PAC is calling on HMRC to lay out its schedule for improving IT systems within three months after the spending review and minimize excessive paper correspondence.
