Snoop dog, e-dog

PAUL APLIN, writing before it was announced that the new CIS system is to be deferred for a year (see page 114), presciently comments on HMRC's e-service delivery and how to improve it.

THE TAX FACULTY of the ICAEW, in its submission to Lord Carter's review of HMRC's e-services, made a plea for the creation of an independent body to 'report on HMRC's progress against its published e-strategy, encouraging the delivery of effective services to realistic timescales rather than flawed services to unrealistic timescales'. Is there really a need for such  a watchdog? I believe that the answer, most emphatically, is yes.   

Dogged by problems

Lord Carter would hardly have been asked to 'advise ministers on measures to further increase the use of HMRC's key online services' if the story to date had been one of total success. The sad fact is that time and again, e-services have been launched with incomplete functionality and inadequate capacity. This has attracted bad publicity and has, for some, reinforced the view that paper systems are still best. Barriers to take-up have still not been fully understood. The net result is that take-up has been disappointing.
In the early days — back in 1997 when the electronic lodgement service (ELS) was launched — there was a significant degree of resistance to electronic compliance methods per se, and widespread concern about security. Over the last eight years, however, the use of computer software to generate tax returns has become the norm, email has become a routine form of communication and the Internet is used to access reference material and information without a second thought. As the IT-related barriers have largely disappeared, one would have expected significant levels of take-up by now. This has not happened because the problem is no longer with IT generally, but HMRC's e-services themselves or, more to the point, the way they have been implemented.
There is an obsession with deadlines. This is in part understandable as e-systems must obviously be launched with a view to statutory deadlines. There are, however, other more arbitrary 'deadlines' and it seems to me that if it is likely that a new service will not be fully functional by one of these, there is little to be gained (and much to be lost) by sticking to it.
I may be wrong of course and one could take the view that the policy of pushing on regardless has been a success. Certainly the number of agents and individuals e-filing self-assessment returns increased again this year and take-up of PAYE on-line was spectacular. But the fact remains that individuals encountered unacceptable problems e-filing their returns in January this year and while large numbers of businesses filed their PAYE returns electronically, the system had inadequate capacity, the associated Eric system (which routes validated information to individuals' PAYE records) was not ready and incentive cheques have still not been issued.
In my view, something is fundamentally wrong with the delivery of HMRC's e-strategy.

The dog that didn't bark

'What strategy?' do I hear you ask? Well, five years ago, the then Inland Revenue posted its e-services strategy on its website but it has since vanished into cyberspace, on the grounds that it has been overtaken by events. This is a shame because it accurately identified many of the potential problems the roll-out would face and stressed the need to address them.  Some are worth repeating now; for example:

• '… ensuring that we understand the drivers to take up and have taken the necessary action to maximise the use of electronic services'
• Identifying 'the extent to which intermediaries are willing and able (or can be incentivised) to take up the opportunities presented'
• 'Refining our view of customer requirements, particularly around the provision of joined up services'

The document also noted

'the critical impact of the initial customer experience and usability on acceptance of the service. External customers are not as tolerant as internal staff in accepting early glitches and teething problems and an early negative experience may lose that customer for good.'

All very perceptive, but 'joined up' is not an expression many people would use to describe HMRC's e-services, and five years on some of the barriers to take-up have still not been fully understood or, perhaps more accurately, acknowledged.  Consultation with intermediaries has been patchy, ranging from the very good to the virtually non-existent. The design of PAYE on-line was very open and inclusive but ELS is apparently being withdrawn in response to a consultation in 2002: what happened to consultation in the intervening three years? And how many users would rate their 'initial customer experience' as even satisfactory?

Good dog (with teeth)

In highlighting these points, my aim is not to snipe at HMRC. Much of what exists, now that it has bedded down, is very good indeed. I make no criticism of HMRC's e-services team, many of whom I have known for years. I have the greatest respect for their enthusiasm, professionalism and commitment. I have also been a long term fan of e-services, having sent the first ELS return, the first agent 'file by Internet' (FBI) return and having worked with HMRC on the development of a number of e-services, most recently PAYE on-line.
My point is that looking back over the last few years, the story could have been so different. There is a need to learn from experience and to start putting into practice the principles so clearly set out in October 2000. I see a new watchdog as the way of achieving this. 
My vision is not of a new bureaucratic beast but of a small independent body that encourages HMRC to adopt an achievable strategy with realistic deadlines and that can monitor the delivery of that strategy. There is a model for such a body in the Electronic Tax Administration Advisory Committee (ETAAC) in the United States of America. The 14-member panel provides an organised public forum for discussion of electronic tax administration issues 'in support of the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns'. It offers its opinion on current or proposed policies, programmes and procedures and provides input into the development of the Internal Revenue Service (IRS) strategic plan. Members serve a three-year term and ETAAC reports annually to Congress on progress. The 2005 report, which is available on the IRS website at www.irs.gov/pub/irs-pdf/p3415.pdf, is a model of constructive analysis and echoes points made in the old Inland Revenue strategy document.

PAC hound?

Aha, I hear you say, but the Public Accounts Committee (PAC) and the National Audit Office (NAO) do all this already or indeed the Office of Government Commerce (OGC) could do it. To an extent perhaps yes, but the need is for a permanent body made up of people with directly relevant expertise. A body with an ongoing remit to assist in the development of HMRC's e-strategy, monitor progress, seek views from stakeholders (including software developers and the tax profession), offer impartial advice on deadlines, and report both annually and publicly would open the way for delivery of properly functioning systems that inherently drive take-up because they make their own business case.
The committee could ask informed questions in a positive spirit, for example:

• If a major driver in other countries is obtaining faster refunds, why is there no electronic version of the R40?
• If a CTSA return has to be accompanied by accounts in PDF format, why can an FBI return not be accompanied by accounts in  PDF format?
• Why does one part of HMRC insist on the receipt of accounts for even the smallest cases with CTSA returns while another part of HMRC refuses to accept them by FBI even for large cases? Why was a common solution not sought?
•  Why is the HMRC team responsible for delivering a system (apparently) moved to a new project immediately the system goes live rather than remaining to resolve teething problems and learn lessons for the future?
• Who have you consulted and when?
• What would be lost by delaying the launch of a particular service until it is fully functional?

I put the first four of these questions to Lord Carter on behalf of the Tax Faculty on 2 September 2005 and they have since been repeated in the Faculty's formal submission (available at www.icaew.co.uk/viewer/index.cfm?AUB=TB2I_86605). Lord Carter immediately recognised their significance and put them directly to the HMRC representatives at the table. That was the moment when for me the argument for an informed, independent and respected body that had an ongoing mandate to ask such questions became compelling. I do not believe that the PAC, NAO or OGC could be this effective.
Members of any such body would have to be sufficiently e-literate to understand the nature of the problems and command the confidence of HMRC, Government and stakeholders. Practical knowledge of the UK tax system would be necessary and it would be very helpful for some members to have knowledge of the evolution and experience of e-service delivery both here and in other countries. The Inland Revenue's 2000 strategy paper noted the importance of learning from experience overseas but my personal feeling is that there is still more to learn; again, an independent view is needed. As with ETAAC, a range of experience should be reflected in the composition of the committee, which should draw members from the tax profession, software and technology sectors, taxpayers and other stakeholder groups.
The benefits, hopefully, would be better, more regular and more effective consultation, a clear and achievable strategy, a better chance of services being fully functional when launched and as a consequence a better initial experience, better publicity and significantly increased take-up. What we are talking about here is compliance and it is in everyone's interest — HMRC, taxpayers, advisers and software developers — to work effectively together; that can only be achieved if an effective forum exists.

Old dogs, new tricks

Alternatively we could accept the status quo, wait for Lord Carter to recommend another mix of incentives and compulsion, disband his review panel and watch the numbers of people using e-services increase while all the time the press runs stories about the failure of the very same systems to work properly. We really have to get away from the cycle of premature launch and bad publicity and remember the point so well made in the 2000 strategy document, the importance of 'the critical impact of the initial customer experience'. An independent monitor is the only way I can see of achieving this.
Even HMRC should welcome the idea of having someone who says to ministers what they often cannot: 'this deadline is impossible' and there is no discredit in occasionally having to say 'we hadn't thought of that'.         
Paul Aplin is deputy chairman of the ICAEW Tax Faculty and a tax partner with A C Mole & Sons. The views expressed in this article are his own. He can be contacted at paulaplin@acmole.co.uk.

Issue: 4032 / Categories: Comment & Analysis