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UK Government Owed Billions in Unpaid Taxes

The government is owed more than 17 billion pounds in unpaid taxes and nearly a third of all payments were late in one financial year, MPs said in a criticism of tax collection methods on Tuesday.

The House of Commons Public Accounts Committee condemned Her Majesty’s Revenue and Customs (HMRC) for the rising number of tax arrears in the 2007/08 tax year, saying it failed to use the latest private-sector debt collection methods.

The cross-party committee said 30 percent of tax payments were late in the year to March 31, 2008, and the total number of tax debts was 22 percent higher than the previous year — taking the sum owed to 17.3 billion pounds.

Chancellor Alistair Darling expects Britain to run a record budget deficit of 175 billion pounds this financial year, and much the same again the year after.

“The department must try every means it can to tackle what is likely to become a growing problem of tax debt, while making allowance for people and businesses in temporary financial difficulties,” said Conservative MP Edward Leigh who chairs the public accounts committee.

But HMRC said the big rise in total tax debts was largely due to accounting changes, and that debt collection had improved greatly since then.

“The report is not a reflection of HMRC Debt activity today,” it said, pointing out that things had changed quickly since last year.

“HMRC has made even further progress since the Public Accounts Committee held its hearing and the detailed National Audit Office report which the committee considered was prepared,” it said.

November’s NAO report showed total tax outstanding in 2007/08 was down to 3.8 percent of tax owed — a level comparable to other countries — from 4.3 percent in 2005/06.