The amount of £40 billion that HMRC announced yesterday that it was unable to collect last year due to tax evasion, fraud and flaws in the system amounted to about £40 million, which would go some way to filling any holes in the government's spending plans. The £40 billion tax gap amounts to 8% of the total take.

HMRC claim to have reduced the gap by £8 billion over the last few years and are aiming for another £4 billion over the next 1-2 years.

The Taxpayers' Alliance claim that HMRC do not do enough to target the right people but often go for the softer, easier targets.

Also published yesterday was the HMRC Capability Review, a re-review of the 2007 findings.

Last year HMRC collected £435 billion and paid out £35 billion in benefits and tax credits. But the department, one of the largest cost £4 billion (0.8% of the total). That is despite it losing 3,000 posts and making £200 million in savings. One point of note is that prior to merging Inland Revenue and HM Customs and Excise the two departments had 105,000 employees.

The Capability Review highlights one area of real concern or ‘urgent development area'; that is to 'gnite passion, pace and drive'.

This is borne out in the following statement from the review: 'Staff morale and engagement are very low and, in some cases, are lower than in 2007. In the 2009 staff survey, only 25 per cent of HMRC staff compared with 61 per cent of its Senior Civil Servants were proud to work for the Department. Current efforts by the senior leadership team to tackle poor staff engagement and improve visibility and communications are not working and this is affecting the productivity of staff. HMRC has a very high rate of sickness absence.

The staff members blame this on 'poor leadership and management skills among middle management'. The report goes on to highlight that 'The senior leadership team does not have a wide enough base of expertise and credibility to manage senior, strategic relationships with key customers and stakeholders.'

I think a good way of dealing with all of this would be to simplify the tax system considerably. This would then take fewer people to collect it, make it easier to calculate and harder for people to evade. It would also be cheaper for businesses and individuals to administer and could, if done correctly, take many people on low wages out of the tax bands altogether.

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