3 Applying good practice in debt management
22. The Department has made significant improvements
in recent years in the way that it collects and enforces debts.
It has compared its practices with a number of other tax authorities,
but does not benchmark its performance on a regular basis with
other public sector or private sector organisations.[26]
The Department's targets and management
information
23. The Department's main targets on debt management
focus on the percentage of taxpayers who pay within 12 months
of the due date (Figure 4). These targets do not provide
a good measure of the effectiveness of the Department's debt collection
as they do not focus on increasing the number of people who pay
by the due date. Nor do they incorporate targets for collecting
debt more quickly than 12 months after it is due.[27]
Figure 4:
The Department's main targets and outturn
| Targets on tax collected
| 2002/03 Target
%
| 2002/03 Outturn
%
| 2003/04 Target
%
|
| Percentage of employers who pay within 12 months of the due date (19 May)
|
96.5
|
97.0
|
96.7
|
| Percentage of self assessed taxpayers who pay within 12 months of the due date (31 January)
|
94.0
|
98.6
|
98.6
|
Source: C&AG's Report, Figure 2, page 10
24. The Department produces management information
on the total amount of debt collected each month on each tax stream,
and the number of enforcement actions and the amount of debt involved.
But it does not have other important information such as the number
and value of cases settled at each stage of the debt recovery
process for each tax stream, where backlogs occur in the system
and how long these take to clear, and the costs of taking each
type of recovery action. The lack of such information affects
the Department's ability to manage the work as efficiently as
possible and to assess the effectiveness of actions taken. The
Department expects to make significant improvements in its management
information by early in 2005.[28]
25. The Department uses an analysis package to segment
the taxpayer population into different groups and examine the
relationship between taxpayer characteristics and their tax compliance
record. A number of private sector organisations including credit
card and utility companies use a similar approach in managing
debt. The Department has not analysed the debt record of taxpayers
in this way.[29]
The Department's computer systems
for managing debts
26. The Department uses an automated Integrated Debt
Management System to manage the collection and enforcement of
debts for PAYE and Corporation Tax. The purpose of the system
is to improve efficiency, reduce costs and tax arrears and to
increase tax flows. The Department uses separate systems for other
tax streams such as self assessed Income Tax and Class 2 National
Insurance contributions. It intends to move self assessed Income
Tax on to the Integrated Debt Management System by 2005 but has
not set a date for Class 2 National Insurance contributions.[30]
27. Using separate systems reduces staff productivity
because it is more difficult to collate information on all debts
relating to a taxpayer and pursue these as one case. Local recovery
office staff can manually link related cases but they have to
look across multiple screens to gauge the full extent of the debt.
As a result taxpayers could sometimes be approached separately
on each debt they owed.[31]
28. Using different systems also means that some
processes have to be performed manually. For example Class 2 National
Insurance debts are initially managed by the National Insurance
Contributions Office. If the Office cannot recover the debt it
is transferred for collection by the Receivables Management Service
who have to input the details manually to the integrated system.
If the process could be automated costs could be reduced by around
half, saving around £1.6 million a year. The Department has
feasibility work under way on fully automating those systems where
records are maintained manually at present. The Department considers
such changes would be cost effective but it does not currently
have the capacity to implement them.[32]
26 C&AG's Report, Executive Summary paras 6-7,
Figure 7 Back
27
ibid, Figure 2; Qq 147-149 Back
28
C&AG's Report, para 1.10; Qq 2-3 Back
29
C&AG's Report, para 4.19; Qq 93, 135-137; Ev 24 Back
30
C&AG's Report, para 1.9 Back
31
ibid, paras 2.9, 3.9; Qq 170-177, 180-181 Back
32
C&AG's Report, para 2.8; Qq 168, 180-181 Back
| 
