Chancellor, George Osborne has been left red-faced after HM Revenue and Customs (HMRC) recently apologised for wrongly estimating how much money it was getting in additional tax income by almost £2 billion.
The spending watchdog, National Audit Office (NAO), revealed that errors in the way HMRC’s performance targets were set meant that it continually overstated the improvements in the amount of extra tax revenues it was actually bringing in.
This revelation could cause plenty of political embarrassment for Mr Osborne, who previously boasted of HMRC’s increased effectiveness in cracking down on tax evaders back in September 2012.
The NAO found that HMRC had set its performance targets for tax compliance yield in the 2010-11 tax year at £1.9 billion lower than they should have been; subsequently meaning the tax authority was able to claim it had exceeded its target by £1.9 billion when in fact it had merely delivered the level of improvement required.
Amyas Morse, head of the NAO, said: “I am concerned that an error of as much as £1.9 billion in HMRC’s baseline calculation led it to report the trend in its performance in a way that inadvertently exaggerated the improvement since 2010-11.”
Partly as a result of HMRC’s apparent over-achievement in 2010-11, its performance target for 2013-14 was increased by £3.3 billion – which they managed to exceed by £0.9 billion – bringing in a record £23.9 billion.
A fresh investigation is now underway to determine whether the targets for future years are adequate.
An HMRC spokesman said: “We regret an historic error made in 2011 when we wrongly calculated the baseline against which our performance was measured.
“We have corrected this error and even against the corrected baseline we have still exceeded our targets. We will work closely with the NAO to prevent this happening again.”
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