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Auditors at the public spending watchdog pointed to teething problems with software and a lack of perceived benefits as possible reasons for the limited take up of the online self-assessment service, which was launched in 2000.
However, the report suggested that the Revenue is learning from its experiences. "Key software issues have been addressed. Many of the early teething problems have now been fixed," it said.
John Bourn, NAO controller, warned that it can take time to redesign existing processes in an organisation as complex as the Inland Revenue. "Teething problems are expected, and need to be learned from quickly," he said.
The Revenue is seen as a standard bearer in the Government's drive to develop services that the public can access by PC or telephone. To date, some 30% of Inland Revenue services are available electronically.
A spokesperson for the Revenue said officials are currently reviewing the NAO report. "We are pleased it has recognised the progress we have made," she added.