Monday, January 31, 2011

Does IT Matter (in Government)

Why do governments (in general) still do so much IT themselves? Do the real saves in IT budgets come from simply not doing IT rather than by consolidating, rationalising, clouding or sharing? I don't mean stopping doing the action itself - I wasn't advocating that if councils stop picking up rubbish they won't need the IT scheduling application for dustcarts, to be topical. I'm wondering if government has already proven that there are plenty of people who can do IT for it and so they don't need to duplicate the capability themselves.

For instance, stamp duty on share transactions is, as far as I can tell, tax raised without government touching the transaction. There are no forms, no authentication - just a cheque from the bank or broker reflecting the value of transactions undertaken (on the buy side) times 0.5%. Finding out exactly how much is raised by this tax is difficult (the figures are usually shown along with housing stamp duty but in 2003-4, Stamp Duty raised £2.6bn from share transactions alone (the total in that year was £7.bn). Is there any IT involved in government? Perhaps a reconcilement system - a general ledger - that compares published transaction data with the amounts received from the various banks and brokers and an audit function who go and check their books. Certainly no complex IT I'd like to think (if anyone knows, feel free to let me know).

So what else might work in a similar way?

Tax Discs

In the last few years one of UK government's most successful transaction has been the online tax disc renewal. I haven't had a car for a few years but I vividly remember the hassle of getting the various bits of paper together (insurance form, car registration and MOT) and waiting in the post office line. I likewise vividly remember carrying out that transaction online for the first time - certainly it counted, for me, as a transformational online service. Two things surprised me though

1) Why was there still a tax disc at all? I wonder how many tax dodgers are stopped randomly by policeman checking windscreens versus looked up via a system with auto-number plate checking systems? Is there really a need for a coloured disc in the car window?

2) Why was government involved at all? Surely the insurance company could issue the tax disc (if it was still needed) and collect the money (the MOT company couldn't as new cars don't need an MOT for the first 3 years making the insurance company the natural choice)? Having an insurance company do it would allow people to opt for various payment methods - monthly, quarterly, annually just as they do for the insurance itself. Getting more creative, as companies (such as Norwich Union) introduce GPS tracking systems to count miles driven, it might even allow tax discs to be paid on a per mile basis

If (2) holds, then government wouldn't need to be involved at all - except, as per stamp duty, reconciling and auditing the money received from the insurance companies.

Taxation

From HMRC's own figures, income tax raises £144bn and national insurance a further £95bn. That's £239bn of revenue raised via PAYE and Self Assessment - perhaps two of the most involved systems in government.

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Following Patrick Carter's work on PAYE, we are now only a couple of years away from every company in the country sending its PAYE data electronically. Companies buy complex accounting systems that generate the PAYE data according to rules published by UK government. When they send it to government, that data is checked according to the same rules and the data fed into a general ledger where doubtless countless adjustments are made because of changes in NI numbers, changes of job, hirings and firings, not to mention tax credits. Is there a way for government to step away from this process?

Can government, in fact, run an App Store the way Apple runs one? That is, store where government approves applications that, say, do PAYE or Self Assessment and even provides a place where they can be easily found and reviewed? And the point of an approved app would be that government would accept the data that it sent without needing to validate it again - therefore removing the need for all of the front and back end validation software that is in use, so reducing the amount of IT involved? Government would still need to operate the general ledger and apply adjustments and reconcile, but it wouldn't need to handle the data entry and validation.

Self Assessment has somewhere between 7 and 9 million customers. Perhaps half of them send the data electronically, perhaps more this year - today is the last day to send returns in so we will have new data on volumes very soon. I imagine the bulk of taxpayers use HMRC's own software - but there are others. Given the wide variety of Self Assessment scenarios - from a pensioner earning interest, through a Welsh Mac-using Vicar on to a multi-property owning landlord to the self-employed, is there a market for targeted apps that do just the essential pieces that these people need - a market that would allow UK government to step away from providing the systems and where intermediaries (perhaps accountants, maybe banks) would spring up to navigate the somewhat arcane tax world for each of those segments and ensure that all data was provided electronically and validly?

2 comments:

  1. SLATFATF5:00 pm

    Why do they tax cars every year?  Why not tax the car at time of purchase for say 10 years and then again after that (for say 5 years).  Or, just do tax every 3 years rather than yearly.  I suspect it is to do with affordability.  If you put 3 years worth of tax on at once you have to come up with a big wadge of cash.

    But I agree, get the insurance companies to do it.  They have almost 100% of car records (if everyone is insured) on their systems.  They only need a flag to say vehicle is taxed.  Then collect the cash with the insurance.  Also, if the only way to buy tax is with insurance then you know if you don't have one, you don't have the other.  Law enforcement becomes easier.  Gov then only has to do policy (how much).
    Even more radical.  Do away with tax altogether and just make the insurance companies pay the entire car tax amounts gov collects and let them decide how they want to get the cash out of people (direct, in terms of car tax).  No more car tax, just an insurance industry with a big bill to pay gov.  Gov only has at most a few hundred customers and they can run that on a spreadsheet 8-)

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  2. Anonymous10:38 am

    cash flow definitely means offer shorter periods rather than longer periods hence my suggestion to let the insurance companies profile as needed.  

    i'm wondering if there's a similar model for tv licences, council tax and so on.  perhaps we should get the electricity or gas companies to collect those - it could even be tied to actual usage if we got smart meters, or council tax could be reduced the greener you were.

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