IT specialists criticise taxman's defensiveness

In a formal statement issued last week, the Inland Revenue attacked Computer Weekly's exclusive revelations about the clearing...

In a formal statement issued last week, the Inland Revenue attacked Computer Weekly's exclusive revelations about the clearing of one million unresolved tax records. But none of IR's complaints held water. Tony Collins asks whether the hostile response is a sign of its reluctance to learn.

But organisations that are hostile to bad news are courting an IT disasters, says the IT supplier body the Computing Services & Software Association in a report Getting IT Right for Government, a review of why public sector IT projects often fail.

This point was also made in an audit of cost over-runs involving new air traffic control systems at the New En Route Centre at Swanwick in Hampshire.

The site is run by state-owned body National Air Traffic Services (Nats).

An independent audit, by consultancy Arthur D Little, found that, in Nats management reports, "Almost without exception, any negative statement about the New En Route Systems Project is balanced by a positive one without an objective measure being provided of the severity of the risks or their potential impact".

Arthur D Little also criticised the "culture which inhibited open debate of potential problems in the project within and outside Nats".

As all major IT projects are intrinsically exercises in setting objectives and solving problems, specialists say that a refusal to countenance bad news means that the organisation may be poorly placed to cope with an impending disaster.

Since the Arthur D Little report, Nats has become more open about its problems, internally and in dealing with the media.

The lesson that openness serves businesses better than defensiveness was also one of the conclusions of a meeting of IT directors from some of the UK's largest organisations last September at the Brewery in the City of London.

The debate had focused on how to react, in public relations terms, to an IT disaster. Would a cover-up of the seriousness of the problems better protect an organisation's credibility and reputation than openness?

Specialists presented case studies which showed that businesses advocating cover-up tended to suffer greater damage to their standing in the marketplace than those that were seen to be responsive and open. This was particularly the case when denials were later exposed as untruthful.

Although there was no unanimity among the IT managers at the meeting, they appeared to favour openness, provided that the messages were co-ordinated through a single source. It was also considered that the worst of all possible worlds was openness used as a front for misleading the public by the selective use of facts.

In its direct dealings with Computer Weekly, the Revenue has been truthful in answering questions although rarely open in volunteering information that is not already known. After an article has been published and has been followed up by the national print and broadcast media, the Revenue has reacted with hostility.

In July this year and again last week it issued formal statements attacking Computer Weekly for its coverage of IT-related problems. In each case the Revenue's statement used facts selectively to suggest that all was well, without giving any outline of the problems.

Were it not for the leak of high-level internal Inland Revenue memos to Computer Weekly, it would not be known that the Revenue had cleared one million unresolved records and was missing an additional 5.2 million taxpayer records.

This apparent defensiveness by the Revenue has been criticised by tax and IT specialists. IT consultant Eddie Bleasdale said that a defensive approach to serious internal IT problems could indicate a lack of willingness to learn lessons.

"There is precious little accountability in some large public sector organisations," Bleasdale said, "Inland Revenue should now be saying what it is doing to minimise in future the problem of records that appear to be missing."

Chas Roy-Chowdury, head of taxation at the Association of Chartered Certified Accountants, said, "We do not know what is going on. They appear to deny everything. They need to come clean, otherwise there will be concern over what is happening behind the scenes."

Computer Weekly comment

Last week, in a formal statement, Inland Revenue attacked the article on the front page of Computer Weekly about the clearing of one million unresolved tax records, saying it was inaccurate. But the Revenue's statement did not highlight any inaccuracies in the article and instead went on to list a series of facts that were not in contention.

Here, we publish the Inland Revenue's allegations and our responses.

"No tax information has been discarded"

The article did not say any information had been discarded. The Revenue has taken the unusual step of clearing its computer systems of one million unresolved records from the 1997-98 tax year after searching unsuccessfully for information that would have enabled the record to be closed normally.

"The data remains on Inland Revenue's records"

The article did not say otherwise. Employers send annual "P14" returns to the Revenue which show how much tax and national insurance has paid in the year. The paper-based P14 records are destroyed once they are microfilmed (see box below). The problem for the Revenue is that, in checking why there are millions of missing records on its systems, it has gone back to the original P14s but has not been able to locate all the microfilms. That is why one million unresolved records were cleared. The microfilms remain on Inland Revenue's records - somewhere.

"We can check the tax position of any individual if further information comes to light that indicates someone has overpaid or underpaid tax"

The article did not say otherwise. It said that a "record can be reopened later if the information becomes available". But unless a taxpayer contacts the Revenue and can prove that he or she has overpaid for the 1997/1998 tax year, the record for the year is unlikely ever to be reopened.

"Cases are not permanently closed"

The article said that the "record can be reopened later if the information becomes available".

"No one will be denied benefit as a result of these actions"

One of the issues is whether the amount of benefit will be affected not whether benefit will be denied. In some cases National Insurance contributions, which can determine the amount of benefits paid, have not been posted to the Revenue's systems for the 1997-8 tax year. If they are not posted, an individual's entitlement to pensions and welfare benefits could not be denied altogether: but they could be reduced.

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