Examination of Witnesses(Questions 120-123)|
CB, MR ANDREW
WEDNESDAY 12 JUNE 2002
120. Can I ask one more question of you Mr Broadbent.
If the situation is that it costs £1.16 to do one of your
VAT returns and there are 1.7 million of those people doing them,
that is about £2 million every time they do one return. If
they did four returns a year that would be £8 million. How
is it we are spending £150 million providing an alternative
system? It would seem to me that we could keep going 20 or 30
years with the old system rather than spending this enormous amount
of money on a new system, and that is assuming the cost will be
reduced to zero which it is not?
(Mr Broadbent) There are two things. First of all,
the £1.16 does not measure the cost of collecting VAT. It
simply measures the cost very narrowly of the processing of a
return on a cheque. Secondly, at the one end the cost is
121. So the cost is much more than £1.16
(Mr Broadbent) For example, collecting VAT also requires
160,000 audits a year. It takes about 6,000 staff to conduct them,
so the narrow transaction cost does not measure the full cost
of collecting VAT. I believe that some of the benefits of getting
a real take-up of VAT is not just in the processing function.
122. So you would still have to do those, would
(Mr Broadbent) One of the advantages of the genuine
e-enablement of the organisation is that the ability to accurately
sort, sift, store and manipulate large volumes of data is enormously
enhanced. It will increase the level of compliance of our tax
regimes and hence allow a reduced number of physical audits.
123. What is the cost per VAT return to the
Exchequer in terms of overall administration costs?
(Mr Broadbent) I would have to come back to you, if
I may, to do the calculation and to get the answer right. 4
Mr Williams: And deduct from them those
costs that you would still have to do under the new system.
Chairman: We will let you think on that
and we will let you off the hook now, lady and gentlemen. Thank
you very much for what has been an interesting session. We do
remain concerned about this. A lot of claims have been made for
e-government and government web sites. We remain concerned about
the inadequate information on usage. We remain concerned about
inadequate progress towards meeting targets. In the words of our
briefing, we remain concerned that the Office of the e-Envoy cannot
yet systematically establish electronic service delivery generating
savings of public money or quality service improvements, so we
shall report on that matter. Thank you very much.
Note by witness: Since
the hearing we have completed an exercise which shows the cost
of processing a VAT (payment) return manually to be approximately
£0.95. This figure does not take wider establishment costs
into account. Using the same assumptions and methodology to make
a like for like comparison with the cost of processing a VAT return
by electronic means, an approximate figure of £1.20 is attained.
In comparison, the cost of processing a VAT return by electronic
means is estimated to be £0.32. By necessity this figure
is based on a number of broad assumptions, most notably take-up
of the new system, variations to which could profoundly affect
the final total.