A spokesman for the Inland Revenue said, "The £17m is a long-term investment to
create an infrastructure to support the development of the tax return service and other Internet services.
"We recognise that it will only be justified if we can persuade increasing numbers of people to use them."
The statement was made in response to research released last week by the Liberal Democrats, which suggested that the Inland Revenue's online tax return system costs the public nearly four times more than the original postal method of filing tax returns.
Edward Davey, Liberal Democrat shadow chief secretary to the Treasury, reported that 80,000 people are using the system, which cost £17m to implement over three years. The £212 cost per person is nearly four times higher then the £60 per person cost of the existing system, he explained.
The Inland Revenue is seen as the standard bearer in the Government's drive to deliver public services that can be accessed by PC or telephone, and take-up of its online self-assessment facility is being monitored closely.
In February the National Audit Office reported a disappointing take up of the service. 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 service.
However, the Revenue claimed the online service's appeal is growing. It said in excess of 51,000 returns have already been filed online for the tax year 2001-2002 - more than double the number it had received at the same time last year.
The Inland Revenue spokesman said, "Take up of the tax return service last year was almost 100% up on the first year of operation, and so far this year take up has increased by a further 160% over the equivalent period last year.
"That very positive response from our customers represents an encouraging start to what we recognise is a long haul and keeps the Inland Revenue in the forefront of delivering e-government services."