| 1. | Customs cannot validate the accuracy of in-year evidence about fraud and the effectiveness of their work until 8 months after the end of the year, when they get the estimate of annual losses due to oils fraud. Oils fraud is continually evolving and Customs need to have timely information on the nature and scale of the problem to tackle it effectively. They could also target resources to tackle key risks more effectively with a better analysis of the scale and type of oils fraud, for example, by region, or by identifying different groups involved in such fraud.
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| 2. | In using intelligence information, different Customs regions display different levels of productivity, in terms of information packages produced per officer, and number of successful operations ("hits") per information package. In 2003-04, on average, officers in Northern Region produced more than 100 information packages each, while officers in London and South Regions produced less than 20 information packages each. But whilst just over 1 in 10 packages in the North generated successful hits, in London and the South East the ratio was 1 in 5. In identifying and disseminating best practice, Customs should consider measures of productivity and effectiveness to assess the quality of intelligence work and compare performance across the regions.
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| 3. | Customs have not set a target deadline for traders under the Registered Dealers Scheme to provide returns electronically rather than manually, or sought to incentivise greater use of electronic submission. Processing manual returns and inputting data is a resource drain for Customs. Electronic submission of returns will allow reductions in processing resources and deliver efficiency gains. Customs should provide incentives for traders to move from manual, paper-based returns to lodging returns electronically, and set a target date for the full electronic submission of returns.
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| 4. | Customs' assessment of the Registered Dealers Scheme was inadequate and based on an incorrect assessment of the number of traders dealing in rebated oils. Regulatory Impact Assessments need to be founded on a sound understanding of the nature of the issues and the likely effect of the proposed regulations.
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| 5. | Few traders were successfully prosecuted by Customs in 2003-04, and sentences for fraudsters average at 15 months. Customs should review whether the penalties for oils fraud provide a proportionate deterrent or punishment for the seriousness of the criminal activity. Customs also need to consider whether their prosecutions strategy is delivering the results needed to deter potential fraudsters.
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| 6. | Customs cannot identify the contribution of each element of their VAT Strategy towards closing the VAT gap and improving trader compliance, nor determine accurately the increase in receipts as a result of their own work as distinct from economic growth. Customs have a programme of activities to reduce VAT losses, some aimed at improving general compliance by traders, but cannot measure on a timely and accurate basis their impact on compliance and closing the VAT gap. They should investigate the feasibility of analysing the VAT gap on both a regional and sectoral basis as well as nationally.
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| 7. | Customs cannot automatically compare a trader's payment and compliance performance to that of other traders within the same sector or industry. Customs rely on manual analysis of data from the VAT mainframe system to carry out such comparisons, and any analysis is ad hoc and far from systematic. Customs should fully develop their National Business Picture, which aims to provide this capacity by generating an overall picture of risk to revenue across the United Kingdom based on automatic analysis of trader records.
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