The taxman is turning to the classic direct marketing technique of behavourial analysis – through a new software package dubbed Connect – in a move which has already brought in an extra £1.4bn in taxes this year.
According to Treasury Minister David Gauke MP, using the Connect system HMRC can now cross-match over a billion pieces of data to enable them to segment taxpayers according to their behaviour and their past relationship with the Exchequer.
By applying analytical techniques, HMRC is able to separate those who are willing and able to pay their taxes, from those “who might need help or those who might push the boundaries of the law”, said Gauke.
The scheme works by embedding behaviour change within letters, forms, telephony and digital channels.
It also allows HMRC to ensure that data collected by one part of the department can be used across all of its compliance areas. It means new relationships can quickly and easily be uncovered between people and organisations that would otherwise remain hidden, so that fraud can be detected and stopped in a way that was not possible before.
One example was its work on Inheritance Tax, where HMRC used the huge amount of information it held on property ownership and transactions, company ownerships, loans, bank accounts, employment history, and self assessment records. All of this was turned into a single code that indicated when the return was likely to be inaccurate and why.
As a result, in the first year of operation an additional £26m was raised.
Other examples include preventing hundreds of millions of pounds in fraudulent VAT claims, and enabling identification of offshore non-compliance to yield over £50m. It total Gauke claimed Connect has already generated around “£1.4bn in additional tax yield”.
Earlier this year, the Government was urged to set up a team of data experts to ensure public information is used more effectively, amid claims that it would open up potential savings of up to £33bn a year.
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