Integration of IT systems at the Inland Revenue and HM Customs and Excise will help the government pick up more of the £26bn in tax which goes uncollected each year.
Improved collecting capabilities and increased operational efficiencies had to be drivers of the decision to merge the two departments, according to Gus O'Donnell, permanent secretary to the Treasury.
O'Donnell told the Treasury sub-committee that by integrating the information held in IT systems, tax collectors would be better able to audit people's accounts.
"Information sharing gives us the ability to put data together. This is very bad news for the dishonest taxpayer," he said.
O'Donnell claimed that officials were aware of the complexity of the integration programme, and promised that services would not be affected. But both departments have suffered IT-related problems in recent times.
On top of improved tax collecting capabilities, the new department, which is yet to be named, will also have to deliver operational efficiencies through its IT systems.
Electronic VAT filing and tax returns are expected to reduce the administrative burden of the combined departments, with 3,000 job losses planned as a direct result of the merger. But no new money will be awarded to oversee the integration work.
The current outsourcing arrangements contain enough flexibility to allow the integration work without pushing up costs, according to O'Donnell.
Meetings between senior IT officials at both departments have already taken place, but final decisions will await the appointment of a chief information officer.
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