Modern tax administrations seek to optimize tax collections while minimizing administration costs and taxpayer compliance costs. Experience shows that voluntary compliance is best achieved through a system of self-assessment. Many tax administrations have introduced self-assessment principles in the income tax law but the legal authority is not being consistently applied. They continue to rely heavily on “desk” auditing a majority of tax returns, while risk management practices remain largely underdeveloped and/or underutilized. There is also plenty of opportunity in many countries to enhance the design and delivery of client-focused taxpayer service programs, and better engage with the private sector and other stakeholders.

This NAO report examines the progress made by the Inland Revenue (now HM Revenue and Customs) to help ensure that correct Income Tax returns are sent on time from those who are required to submit them, focusing on the following issues: the reasons why taxpayers should file them on time and accurately; the Department's performance in getting returns in by the deadline and in chasing late returns; accuracy of taxpayers in submitting returns and of the Department in processing them; and the need to make forms easier for people to complete in order to reduce compliance and processing costs. The report makes a number of recommendations for improvements focused on seven areas, including achieving the 2008 Public Service Agreement target for the proportion of taxpayers who file on time; using sanctions to encourage timeliness of tax returns; improving the accuracy of Revenue processing methods; and improving the clarity of the self assessment form.