Fear of computer fiasco imperils tax reform

The biggest tax reform in half a century may be in jeopardy because of a dispute between the Inland Revenue and its computer contractor based in the United States. The Government has pledged to introduce self-assessment for 9 million higher-rate taxpayers and the self-employed in an attempt to cut red tape and make the system cheaper and more accurate. Much of the legislation is in place for the implementation of self-assessment in1997. Kenneth Clarke, the Chancellor of the Exchequer, introduced measures designed to make its introduction easier in the last Budget, and reaffirmed the Government's commitment to the reform.

Senior civil servants have, however, disclosed to Computer Weekly magazine that implementation may be under threat because EDS, the computer company that operates all Inland Revenue systems, believes the technology needed to run self-assessment is unproven and could fail. Senior executives at EDS, based in Texas, argue it would be imprudent to introduce the system yet and are concerned that a disaster would reflect badly on the company. The cost of the project is estimated at £200m.

The head of information systems at the Inland Revenue, John Yard, and the Director General, Geoffrey Bush, visited Dallas late last year to speak to senior executives at EDS including the chairman, Les Alberthal. They reportedly stressed the importance of the Government's policy of introducing self-assessment within the life of the current parliament, particularly as the Chancellor had made the commitment himself. Mr Yard said: "EDS and the Revenue are looking very carefully at the way ahead. It would be unfair to say that we were worried."

A spokeswoman for the Inland Revenue said last night: "It's very early days. At the moment they don't agree or disagree. We are still talking to them about the development of self-assessment. But I will say that the self-assessment will go ahead as planned."

EDS takes full control of the project next year. It won the £1bn contract to run and develop the Inland Revenue's computer systems last year - the biggest single government contract for a decade. One of the principal motives in privatising the computer operations was to speed up the introduction of the new systems for self-assessment.

But EDS executives are worried that the system as it is envisaged will be a fiasco. Most of the Inland Revenue's computer systems are incompatible with the technology needed to run self-assessment. EDS points to other failures in similar circumstances. The Performing Rights Society recently ditched a similar system. The Inland Revenue system would be the biggest of its kind in the world, with terminals on the desks of more than 30,000 staff.

A spokesman for EDS said the discussions over self-assessment were "part of an ongoing process of review".