Tax authorities are spending millions on unnecessary technology and training while accused of cutting jobs and customer services to the bone.
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Just this week, the Internal Revenue Service (IRS) in the United States and HM Revenue and Customs (HMRC) in Britain have faced criticism for slack spending.
In the US, the IRS had to spend £11.55 million on rewriting critical software to upgrade faulty systems vital for collecting data from overseas tax authorities under the Foreign Account Tax Compliance Act (FATCA).
In Britain, HMRC accounts showed that £32 million was spent on establishing a centre of excellence for training financial experts who would be seconded to overseas governments to help improve their tax collection processes.
However, although the experts were trained, only half were sent overseas.
A report from the US inspector general for tax administration confessed that not only did a faulty software release cost the IRS $15 million to upgrade, but the blunder put FATCA back by four months.
“The IRS first identified data matching issues in May 2015,” said the report.
“Although the initial data matching issues were resolved, the IRS identified new data matching issues as recently as February 2016. The IRS does not have a timetable for when the latest data matching issues will be resolved and if automated functionality will provide all of the expected business results.”
FATCA is also causing financial firms working across different countries difficulties, as some expats moved across borders between states with FATCA agreements and those that do not, the report highlighted.
HMRC and the Department for International Development came under fire from watchdog the Independent Commission for Aid Impact for failing to set clear objectives and not monitoring results for work in helping less developed nations tackle tax evasion.
“HMRC spent £1.17 million on training 15 tax experts to stand in for inspectors who would be seconded overseas, but has never achieved deploying seven or eight of them and is unlikely to do so in the near future,” says the report.
The commission also found that intense short, specialist courses were also a waste of cash as tax officials overseas did not have the time or skills to digest the technical information offered by HMRC trainers.
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