Questions have been raised about the ability of HM Revenue and Customs' staff and systems to cope with workloads, after it emerged that there are discrepancies in more than 13 million computerised tax records.
The number of anomalous "open cases" is five million higher than six years ago, when numbers reached crisis levels, prompting the Revenue to hire 1,250 people to clear the backlog.
Tax specialist Matt Boyle, who worked as a Pay As You Earn tax official for 27 years, said the problems meant that, although the Revenue was collecting about £210bn a year from employers in tax and national insurance contributions, its systems did not have a clear record of where all the money had come from and who had paid it.
He said, "The inability to match pay and tax details with individuals shows clearly that HM Revenue and Customs has a problem in determining who has paid what. Millions of individuals are not having their tax record correctly updated."
The discrepancies are likely to increase the risks of the Revenue's planned upgrade of the PAYE system.
The department aims to transfer taxpayer files from its Computerisation of PAYE (Cop) system to the newer National Insurance Recording (Nirs) 2 technology, which is run largely by Accenture under the £8bn Aspire contract between HM Revenue and Customs and Capgemini.
The Revenue recognises that the transfer of data is risky - particularly as millions of files have yet to be reconciled.
The number of open cases reached crisis levels of about eight million in 2001. Whitehall officials blamed this on difficulties in matching files on the Cop system with the Nirs 2 system.
The department allocated £38m and hired an extra 1,250 clerical staff to tackle what it called "open case clearance work". It expected to reduce the number of open cases to six million by 31 March 2007.
But the number is more than twice this figure, according to a parliamentary reply, information supplied under the Freedom of Information Act and a report published last week by the National Audit Office.
Vincent Cable, the Liberal Democrat shadow chancellor, said he questioned the competence of the department to administer tax systems.
A spokesman for the Revenue said, "The good news is that we aim to have reduced the number of open cases to 10.5 million by April 2008. The problem is really to do with the changing nature of employment patterns, [with people] moving jobs more often. That makes it much harder for our systems to reconcile at the end of the year."
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