Inland revenue to merge with Customs in tax reform

A merger between the Inland Revenue and Customs & Excise will be announced by Gordon Brown in his Budget on Wednesday.

A merger between the Inland Revenue and Customs & Excise will be announced by Gordon Brown in his Budget on Wednesday.

Merging the two agencies responsible for collecting taxes would create an organisation with almost 100,000 employees. The Treasury believes the shake-up will save billions of pounds, as well as offering businesses a single point of contact.

The merger is likely to be phased in because of fears the fight against tax evasion and fraud could be weakened during the upheaval. The Chancellor will make the crackdown on tax loopholes a main theme of his Budget. A Whitehall source said: "We must not drop our guard while we bring in structural changes. These things can't happen overnight."

Merging the two agencies was recommended by a review launched last summer by Gus O'Donnell, the permanent secretary at the Treasury.

Independent experts have predicted a merger could close the estimated £30bn gap between the revenues the Government thinks it is owed and the money it actually receives. A Treasury-ordered review of the black economy by the QC Lord Grabiner in 2000 found a need for more co-ordination between the bodies responsible for collecting taxes. However, the savings could take several years to achieve and would not necessarily help Mr Brown balance the nation's books. Analysts predict he will face a £10bn "black hole" after the general election, expected next year.