A Tale Of Two Revenues

Mike Godfrey and Jason Gorringe, Tax-News.com in New York and London

23 February 2001

Can you match the headlines to the UK and the US: 'Online Tax Returns To Triple This Year' and 'Revenue Online System Insecure' ?

Easy Peasy! Unfortunately for the UK's Inland Revenue, it can only grit its teeth in rage and humiliation when it compares its performance over on-line filing with its transatlantic cousin, the IRS.

Growing user confidence and good on-line software both from the IRS itself and from 3rd-party suppliers meant that more than 6 million US households are expected to prepare tax returns online this year, three times last year's 2 million.

Forrester Research also predicts that over the next five years "tax e-business networks" will emerge as financial firms, payroll providers, tax preparers, tax agencies, and other participants link up in real time over the Net.

"Financial consumers have also become quite savvy in their online usage," said Forrester, "More than 15 million U.S. households have transferred balances, paid bills, or traded stocks online, and another 5 million will do so for the first time this year, laying the groundwork for the online tax preparation boom."

Forrester estimates that 80% of tax filing will be done online by 2007.

Now for the poor old Inland Revenue, with its pin-striped suits and 1960's Monroe mechanical calculating machines.

The Revenue first began accepting tax forms over the internet, from self-assessment taxpayers, only last summer and fewer than 40,000 people had used the system by the 1999-2000 tax year deadline at the end of last month, far short of the 200,000 target.

By 2005, the Revenue aims to be receiving 50 per cent of all tax forms online. Online PAYE filing is due to go live on April 9.

So the goals of the two Revenues are not that dissimilar; but while the IRS appears to be on track to meet its goal, who would bet on success for the Inland Revenue?

'The Inland Revenue's online tax filing system is insufficiently secure and could expose companies and individuals to fraud,' said the Confederation of British Industry this week. The CBI said the Revenue had wasted an opportunity to set a good electronic business example, by insisting that online filing should be authorised by a password sent out in the post, rather than by a digital signature.

"Anyone can get to know (a password) if they are determined enough," Nigel Hickson, the CBI's head of e-business, told online business publisher VNUNet.com.

The Revenue said it was loath to burden companies with extra costs but the CBI said the government had really missed an opportunity to get the technology out into the market.

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