The Inland Revenue is unlikely to meet its target of getting 50 per cent take up of electronic services by 2005, because it has not made the option attractive enough, according to the National Audit Office (NAO).
The NAO found that only a quarter of the 200,000 taxpayers expected to use the internet service for self assessment for the 2000-2001 tax year had done so.
By 4 January 2002, only 50,125 had used the internet, compared with 39,000 last year. The Revenue saves £3 each time a taxpayer uses the internet filing system.
The Revenue has had problems with accepting returns over the internet; in 1999-2000, system records showed that a shocking four out of five attempts did not succeed.
Between April and September 2001 this improved to a 44 per cent success rate, and improved further to an average of 70 per cent for the quarter ending December 2001.
But business interest in the electronic filing of pay-as-you-earn tax returns has been high. Around 660 businesses contacted the Revenue about the service.
Of these, 49, including payroll bureaux representing 5,000 employers, now send tax data for six million employees electronically to the department each year. The Revenue estimates it will save £20m by 2004.
The NAO said that there are already clear benefits for business users, and some benefits for individuals. But it added: "Taxpayers expect further added value from completing their tax returns electronically.
"Take up of the internet service for self assessment will only improve significantly once online forms offer further added value to customers."
The Revenue is moving towards a portal environment offering secure personalised services, but it will take time and resources to redesign the services.
The NAO warned that simplifying the tax form will require legal change, and that linking to data stored elsewhere in the department to complete many of the questions on behalf of users would require new software to link existing computer systems.
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