Why the HMRC Shouldn't Become a Payroll Organisation

September 07, 2010 4:37 PM

The Telegraph reports today that the HMRC are considering a new way
to deal with the pay-as-your-earn (PAYE) system after it emerged last week that
hundreds of thousands of wage earners have had the wrong tax amounts deducted
from their monthly pay cheques. 


Under the new system companies would pay salaries into a
‘central calculator’ run by the HMRC. 
The taxes would then be deducted by the HMRC and the remaining amount
would be passed on to the wage earner. 
Effectively, the HMRC would turn into the largest, public payroll
organization in the United Kingdom, if not the world, if they were to happen.


There are many reasons why this is a bad idea.  Two of the most important reasons are
government transparency and IT infrastructure cost.  In this the age of austerity and transparency
why would the government even want to get into payroll?  While Eric Pickles and the rest of the
Coalition Government are espousing decentralisation and localism, centralising
payroll under one government institution in one central location is a move in
the opposite direction.  How will we the
wage earners keep the government accountable? 
Will everyone’s salary and taxation level be available online to view as
a matter of opening up data?  And who
will the wage earners talk to if there is a mistake?  Will we all have to walk over to Whitehall to
talk to someone about our tax deductions? 
The very idea of the HMRC acting as a central manager of payroll is just
not realistic at all.


More importantly, in many ways, is the massive cost of IT
infrastructure available to handle this expansive payroll system.  The current situation of PAYE tax calculation
mistakes occurred because of an over-budget and centralised database project
run under the previous Labour government. 
Best estimates are that the project ran over the estimated £140 million.  If the current system can’t handle a PAYE tax code issue at present, imagine
how much it would cost to actually create a successful, massive payroll
system?  And what about issues of
privacy?  Will the government lose our
payroll data?  And what about
security?  Central databases are easy
targets for hackers who would no doubt love getting into a database like
this.  And what about all of the physical
infrastructure involved – database developers, payroll specialists, and the
like needed to manage this?  Where is
that money going to come from?


Of course there are many other reasons to worry about why
such a scheme would be a bad idea and those mentioned above are only the tip of
the iceberg.  However, in this Coalition
Government that espouses transparency, this proposal is an even worse
idea.  The Coalition Government should
focus on continuing decentralisation for the sake of all of our pay cheques and
not even acknowledge the very existence of this proposal.

The Telegraph reports today that the HMRC are considering a new way
to deal with the pay-as-your-earn (PAYE) system after it emerged last week that
hundreds of thousands of wage earners have had the wrong tax amounts deducted
from their monthly pay cheques. 


Under the new system companies would pay salaries into a
‘central calculator’ run by the HMRC. 
The taxes would then be deducted by the HMRC and the remaining amount
would be passed on to the wage earner. 
Effectively, the HMRC would turn into the largest, public payroll
organization in the United Kingdom, if not the world, if they were to happen.


There are many reasons why this is a bad idea.  Two of the most important reasons are
government transparency and IT infrastructure cost.  In this the age of austerity and transparency
why would the government even want to get into payroll?  While Eric Pickles and the rest of the
Coalition Government are espousing decentralisation and localism, centralising
payroll under one government institution in one central location is a move in
the opposite direction.  How will we the
wage earners keep the government accountable? 
Will everyone’s salary and taxation level be available online to view as
a matter of opening up data?  And who
will the wage earners talk to if there is a mistake?  Will we all have to walk over to Whitehall to
talk to someone about our tax deductions? 
The very idea of the HMRC acting as a central manager of payroll is just
not realistic at all.


More importantly, in many ways, is the massive cost of IT
infrastructure available to handle this expansive payroll system.  The current situation of PAYE tax calculation
mistakes occurred because of an over-budget and centralised database project
run under the previous Labour government. 
Best estimates are that the project ran over the estimated £140 million.  If the current system can’t handle a PAYE tax code issue at present, imagine
how much it would cost to actually create a successful, massive payroll
system?  And what about issues of
privacy?  Will the government lose our
payroll data?  And what about
security?  Central databases are easy
targets for hackers who would no doubt love getting into a database like
this.  And what about all of the physical
infrastructure involved – database developers, payroll specialists, and the
like needed to manage this?  Where is
that money going to come from?


Of course there are many other reasons to worry about why
such a scheme would be a bad idea and those mentioned above are only the tip of
the iceberg.  However, in this Coalition
Government that espouses transparency, this proposal is an even worse
idea.  The Coalition Government should
focus on continuing decentralisation for the sake of all of our pay cheques and
not even acknowledge the very existence of this proposal.

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