Small and midsize businesses say new tax-collection system costs them dearly, while government auditors dispute accuracy of IT-reform related savings.
Three critical reports suggest the British government's claims it's using technology to cut down red tape and increase national efficiency may need to be viewed a tad more skeptically.
In the first, a survey by a small and midsize business (SMB) organization claims that the recent introduction of a real-time information (RTI) payroll element for smaller firms -- part of a drive by the nation's tax collection agency, HMRC, to improve visibility of wages to support the imminent Universal Credit welfare reforms -- has driven up compliance costs significantly for that sector.
The study, by the Forum of Private Business (FPB), said that the average British small business' 2012 compliance bill rose 8.5% compared to 2011, and that the total costs reached a new annual high of £18.2 billion ($27 billion).
Most of this rise, it claims, is due to an average of 11% in higher fees being charged to smaller employers by external providers of payroll and tax support. The organization's policy adviser, Robert Downes, said: "The stand-out surprise has to be the huge increase in spend on external contractors. We believe this is largely down to RTI," he added, with firms having to pay a payroll specialist to manage their employees' tax records differently.
The group also claimed the cost of coping with RTI is much larger than the government predicted: HMRC anticipated the cost to small business of RTI work at £120 million ($178 million) prior to its April 2013 launch, but the Forum's research puts the figure at more than double that, at more like £311 million ($462 million).
Meanwhile, HMRC itself was warned about RTI by the U.K.'s official spending watchdog, the National Audit Office. NAO noted in its comments on HMRC's accounts that it hasn't yet addressed problems about implementation deadlines and functionality that emerged in the pilot stage. It said: "The financial and accounting systems supporting RTI are not yet fully accredited because a number of issues were identified during the pilot."
Plus, limitations in the scope of that pilot mean that some of the system functionality, such as end-of-tax-year reconciliations, is being tested in 2013-14, while the RTI program budget does not include contingency for any significant extra development costs. As a consequence, the auditor calls on HMRC to "urgently address" these weaknesses with RTI.
And in yet a third blow against government rhetoric on IT and efficiency, the NAO has also called into question claims that IT reform is a solid element of recent well-publicized figures of £10 billion ($15 billion) worth of savings between 2012 and 2013.
In fact, said the NAO, IT "reform" and higher use of digital services comprised a mere 3.6% of this final figure, or £365 million ($542 million). The body is also unhappy with the way the savings are described as if they represented actual savings accrued, when they are simply planned. They reminded government spin-doctors that, "Care needs to be taken when presenting these savings publicly as the basis of calculating them is different to other savings, making it potentially inappropriate to add them together."
It is important for the public to understand that the savings comprise a mix of reduced spending, plans to reduce spending, one-off receipts and costs transferred to others, it added.
This inaugural episode of Business Matters explores the subject of leadership with former Air Force Brigadier General John Michel, the Chief Strategy & Innovation Officer and President of MV International.