HMRC is giving customers the worst service since the DVLA

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a day ago

First it was M&S, then the Co-op, and Harrod's. And this week, we have learned that HMRC may be the latest major British organisation to have its data security compromised, with reports that the confidential information of more than 100,000 taxpayers may have been stolen.
But hold on. It is bad enough for a private company to be hacked. But the tax authority should be taking security far more seriously. At the end of the day it doesn't really matter whether a group of hackers in Belarus knows whether you generally order the prawn or the chicken sandwich at M&S, or if an AI bot may have stolen the details of your last order at the Co-op. But HMRC has genuinely private information – and if that can't be secured, trust in the whole system will quickly break down.
It is a shocking revelation. Officials told the Treasury Select Committee that what it described as 'multiple phishing attacks' had been staged by several criminal gangs over the last year.
It estimates that £47 million may have been lost, and admitted it was stepping up security to try to deal with the issue. It is hardly the first time HMRC has had these issues. In 2021, it formally disciplined staff for failing to protect security, and issued close on 100 written warnings to employees.
In fairness, every organisation that moves systems and data online is going to occasionally suffer from attacks. Hackers are very smart, and can make so much money from fraud that they will devote huge resources to breaking through whatever firewalls may be in place. Even so, the latest incident highlights how bad the crisis has become at HMRC, and how urgently it now needs to be fixed.
In reality, there are three big problems. First, tax reporting and payment has been moved online before HMRC is ready to deal with it adequately. The 'Making Tax Digital' system already applies to VAT, forcing lots of small traders to file all their information via the internet, and will soon be extended to landlords and the self-employed as well. Sure, it might be more efficient in the long-run, but it can only operate if the system is secure and reliable.
Next, the tax system has become far too complex. We have income taxes, VAT, corporate taxes, inheritance taxes, capital gains taxes, stamp duty, council tax, and a dozen or more fiddly little green levies and charges to keep track of. It is bewildering.
We are about to make it even more complicated by means of testing the winter fuel allowance for pensioners. For every tax, and for every means test, there has to be another set of data to put online, and that opens up yet another system that is vulnerable to hackers.
Finally, frozen thresholds have dragged far too many people into the self-assessment net. There were almost 12 million tax returns filed for the last tax year, up from 10.2 million as recently as five years ago. The number is rising all the time. Again, more data means the system is more vulnerable.
In reality, successive Chancellors have pushed taxes up to a 70 year high, without building a reliable system to deliver the revenues. There are always going to be penalties and fines in the background, but fundamentally any tax system relies on trust and support from the people who pay the bills. If the system can't be secured against hackers, that is going to break down, and rightly so – and both HMRC and the Treasury will have no one to blame but themselves.
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