The UK tax authority, HM Revenue and Customs (HMRC), is reportedly preparing to utilize private sector debt collection teams to chase outstanding tax debts.
The revelation comes as HMRC's budget for tackling tax avoidance and evasion has been boosted by GBP900m, as part of a larger plan to generate billions in new tax revenue.
In November 2010, HMRC announced that bad debts had jumped by 40% during the previous 12-month period, from GBP4.5bn to GBP6.4bn. At this point, HMRC announced a pilot scheme to appoint private sector bailiffs to pursue debts.
The appointment of debt collectors is expected to generate GBP1.35bn under a deal said to be worth about GBP70m for the debt collection firms. This figure, if achieved, represents a ten-fold increase in HMRC's debt collection activity.
It is unclear whether collection agencies would focus on both businesses and individuals, but the report warned that individual tax debtors who are the subject of HMRC enforcement efforts can expect their debts to be chased by post and by phone, and eventually by the use of bailiffs.
The thinking behind the scheme is that resources would be freed up within HMRC so that higher risk and more complex cases can be pursued. However, there is little evidence that outsourcing tax debt collection is a more cost-effective means of increasing revenue.
The revelation comes as HMRC's budget for tackling tax avoidance and evasion has been boosted by GBP900m, as part of a larger plan to generate billions in new tax revenue.
In November 2010, HMRC announced that bad debts had jumped by 40% during the previous 12-month period, from GBP4.5bn to GBP6.4bn. At this point, HMRC announced a pilot scheme to appoint private sector bailiffs to pursue debts.
The appointment of debt collectors is expected to generate GBP1.35bn under a deal said to be worth about GBP70m for the debt collection firms. This figure, if achieved, represents a ten-fold increase in HMRC's debt collection activity.
It is unclear whether collection agencies would focus on both businesses and individuals, but the report warned that individual tax debtors who are the subject of HMRC enforcement efforts can expect their debts to be chased by post and by phone, and eventually by the use of bailiffs.
The thinking behind the scheme is that resources would be freed up within HMRC so that higher risk and more complex cases can be pursued. However, there is little evidence that outsourcing tax debt collection is a more cost-effective means of increasing revenue.
