Corrupt taxman `cost UK millions'

THE EXPLOITS of the corrupt tax inspector Michael Allcock may have cost the taxpayer millions of pounds, the Government admitted yesterday. In its first formal report on the affair, the Treasury has concluded that it is unlikely that the "full extent" of Allcock's activities could ever be established.

After seven years of investigation, civil servants have effectively concurred with MPs' claims that the 49-year-old inspector could have failed to register millions in tax due.

Allcock, the head of an elite team to tackle City fraudsters, was sentenced to five years in prison in 1997 after an Old Bailey jury found him guilty of six counts of corruption.

The trial heard that he had accepted pounds 150,000, trips to Monte Carlo, a Caribbean cruise, Concorde tickets and the services of a prostitute in bribes from the wealthy Arab businessmen he was supposed to investigate.

Both the National Audit Office (NAO) and the Commons Public Accounts Committee issued scathing reports last year attacking the Inland Revenue's failure to keep proper checks on its staff and to spot the fraud.

The Treasury yesterday responded to those reports with a range of measures. The Inland Revenue is to set up a new confidential complaints system that will allow taxpayers to report worries about their taxmen without fear of being victimised.

Staff will also be subjected to tighter financial vetting and make annual declarations that they have complied with a tough code of conduct. Periodic staff surveys will be conducted and managers are to be trained in spotting tell-tale "warning signals" in an employee's behaviour. Any member of staff exhibiting an extravagant lifestyle, financial problems, unusual gifts, regular excuses for poor performance and rule-breaking will be monitored closely by their bosses.

To the amazement of some MPs, Allcock received his full salary of pounds 58,000 when he was suspended between 1992 and 1994. For a further two years of suspension, the Inland Revenue gave him pounds 35,000 in hardship payments. In its report to Parliament, the Treasury outlined a range of possible penalties it is considering taking against Allcock, including stopping his pension and recovering the hardship payments.

Allcock headed the "Ghostbusters" team, a high-powered section tasked with tracking down "ghosts" - people who had never registered for tax. Police found he had indulged in fraud on a "breath-taking scale", receiving air tickets and holiday accommodation, and taken cash from taxpayers.

In a report to Parliament published today, Sir John Bourne, head of the NAO, stated that weak management controls and naive assumptions about the honesty of tax inspectors had created a culture where corruption could exist undetected.

Both the NAO and the Public Accounts Committee found that Allcock was not alone in acting fraudulently and revealed that five other tax inspectors had accepted excessive hospitality, such as holidays abroad. Three were demoted, with salary cuts of up to pounds 8,000, while two others were given formal warnings. Other members of staff were under suspicion, but insufficient evidence was available for disciplinary proceedings.