A "major review" team, chaired by Gus O'Donnell, permanent secretary to the Treasury, will look at the internal workings of both departments to see whether costs can be cut and processes simplified.
Each department has a mixture of old and new IT systems but both rely heavily on ICL mainframes, which use the proprietary VME operating system.
Paymaster general Dawn Primarolo told a Commons committee last week that the Inland Revenue and Customs and Excise "have a very large number of customers in common". She said the review team would look at the "coherence of administrative systems ... taking into account future technological developments which will open new avenues for enhanced services".
The departments duplicate administrative efforts in that they both collect tax money and try to stop evasion. Together, they have spent billions of pounds on IT contracts and introduced technology that has raised questions over whether many thousands of civil service jobs are needed.
One suggestion has been to create a "Ministry of Finance" which could handle the collection of taxes and pay tax credits.
The Inland Revenue has a 10-year IT contract with US-based services supplier EDS, worth some £2.4bn, which expires in April 2004 and involves about 3,000 IT staff. The new contract, which is to be awarded shortly, will be worth at least £3bn, and could be much more if the Revenue's chosen supplier acquires systems at Customs and Excise.
Customs has systems contracted out to Fujitsu under a 10-year deal which began in April 2000. However, the contract could be "novated" or transferred to the control of the Inland Revenue's IT supplier.
Customs and Excise has sought this year to address bugs in its "Chief" system for handling imports and exports, which collects £43bn of revenue each year.
Specialists who have an understanding of the affairs of the two departments say there are mixed views over whether the review is intended genuinely to bring about change or is an attempt to be seen to be doing something after the disastrous introduction in April of new systems and procedures to handle tax credits.
The review's findings will be reported to Parliament later this year.