Headlines: March 18th, 1998

The Contributions Agency, an executive agency of the Department of Social Security, is to merge with the Inland Revenue in April 1999. Most of the agency’s 8,000 staff will join the 50,000 strong Inland Revenue, but there will be about 200 job losses.The aims of the merger are to give a better service to businesses and improve the effectiveness of compliance measures. There will also be some efficiency savings.

Businesses will benefit in different ways. It should be easier to sort out tax and contribution matters through one organisation. Whether the same official will deal with all questions remains to be seen. The differing rules and definitions which now apply to tax and contributions should be on a convergence course, but a lengthy period of time is likely to elapse before businesses notice the difference. Another advantage claimed for the merger is that there will be a single focus for discussion on improving legislation, procedures and guidance.

The merger will bring a management challenge in melding the two very different cultures. Sharing expertise in combating avoidance will give little compensating benefit. This leads to the question of whether it is really worth all the effort. Viewed in terms of efficiency and effectiveness the answer is probably, no. The driving force for the change is reducing the burden on business. There has been long term collaboration between the Inland Revenue, Contributions Agency and Customs and Excise to help business and particularly to make life easier at the business start up stage. The start up notification to all three bodies can now be made with one piece of paper, or for those living in the Luton area, electronically with a smart card.

The merger is the natural progression of the collaboration project. Although it might appear that the next step is a merger between Inland Revenue and Customs and Excise, there are official denials that this is on the agenda.