Jobs go in Customs merger with Revenue

Leading tax advisers were horrified yesterday at the prospect of the Chancellor's planned merger of the Inland Revenue and the Customs & Excise to create a super ministry within the Treasury.

The merger, which will result in 10,500 job cuts, coincided with a crackdown on an estimated £12bn a year tax avoidance in the UK.

Guy Smith, a partner at the accountancy firm Moore Stephens, said: "The result of the merger will be a complete change in working practices and fundamental changes to the compliance regime. Given that the Revenue and Customs operate in a completely different manner, and that the Revenue frequently encounters administrative difficulties of its own, this seems an ambitious move. It could create potential problems for those dealing with the newly merged department."

Frank Haskew, head of the tax faculty at the Institute of Chartered Accountants in England and Wales, said: "The merger is a nice idea in theory, but in practice may turn out to be a lot more messy. Past experience of the Revenue taking over the National Insurance Contributions Office does not inspire confidence. The failure a few years ago to send out reminders of NIC records has left many with potential shortfalls in their state pension. We would prefer to see a period of closer working between the two offices to identify administrative savings for taxpayers before a full-scale merger is implemented."

Gordon Brown said in his Budget speech: "Whereas in the past business had to deal both with the Revenue and Customs, business will now deal with a single tax service, which, because of the investment we have made in new technology, can make large savings in back office costs."

The two departments yesterday unveiled a gross cut of 14,000 jobs and redeployment of 3,500 staff, making an overall reduction of 10,500 staff by 2008.

The merged department has not yet been named, but the surviving staff will move into the main Treasury building in Whitehall, central London, before the end of this year. About 150 strategic policy staff will work directly for the Treasury.

The new department is expected to improve customer services, cut compliance costs and increase efficiency. There will be clearer roles and responsibilities for tax administration within a new accountability framework and annual remit laid down by ministers. "We hope it's going to save quite a lot of money," said Gus O'Donnell, the civil servant whose report recommended the merger.

Mike Eland, chairman of Customs and Excise, said: "We welcome the opportunity to create a new organisation which will take the best of the culture and skills of two departments with long and successful histories." The post of executive chairman of the new department is being advertised on the Treasury website.

Richard Collier-Keywood, head of tax at PricewaterhouseCoopers, said: "Our concerns are to ensure that this merger would not result in a disruption to services to taxpayers in the short term."

Aidan O'Carroll, national head of tax at Ernst & Young, said: "There is an opportunity for the Government to get it more right than wrong. But with the merger ... there has to be a worry that the tax authority will find the reporting regime difficult to manage."