Her Majesty’s Revenue Leakage

Businesses spend a lot of time worrying about revenue. But as individuals we all need to worry about Revenue with a capital R, by which I mean the taxman. If you think telcos have a bad time keeping a track of all those transactions, feel some pity for Her Majesty’s Revenue and Customs (HMRC) a.k.a. the UK taxman. The latest figures from the National Audit Office show that fraud and error in the UK tax credit system caused losses of around UK£1bn during 2004/05. Here is the story from the BBC. Of course, the new prime minister, Gordon Brown, may try to argue that is actually good news. For a start, he could point out that the original overpayments were UK£1.8bn, which I guess means HMRC eventually clawed about half of the overpayments back. Or he could say the figures represent a big improvement on previous years. According to The Guardian, well over UK£9bn has been lost in the four years since Gordon Brown, then Chancellor, first introduced the tax credits scheme. But if I was Gordon I would point out that a cool billion represents leakage of less than 0.25%. Per the Public Finances Databank, the taxman’s net collections for 2004/05 totaled UK£427bn.

Tax has a lot in common with telcos. They both involve complicated and obscure rules to work out who owes what. They both deal with lots of transactions with lots of people. They are both very unpopular. They both generate lots of complaints. They are both prone to attack from fraudsters and both have problems with collection. They both spend lots of money on IT systems only to find that their data is all messed up. So perhaps the taxman should hire some telco experts to run systems, clean data and stop leaks. With 10,000 people now employed to work on tax credits, it might provide a useful refuge for telco employees worried about downsizing or off-shoring. But if telcos really do lose somewhere between 2% and 10% of revenues (as discussed in my last blog) then HMRC should avoid telco people like the plague. If the figures are to be believed, leakage of 0.25% means HMRC represents revenue assurace best practice when compared to telcos. Which means your typical telco guru is not good enough to deserve a job in the public sector. Now that is truly worrying.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.