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$16 billion in U.K. tax fraud due to lack of oversight, official charges

Dec. 31, 2012 at 11:15 AM

LONDON, Dec. 31 (UPI) -- The head of Britain's Work and Pensions department charges that fraud in the country's tax-credit system has cost taxpayers more than $16.2 billion.

Ian Duncan Smith said a system of tax credits targeting lower-paid Britons is open to abuse because of the inadequate number of checks on those who receive the assistance, The Daily Telegraph reported Sunday.

In an article published in the newspaper, Smith wrote that Britain's welfare bill rose 60 percent between 2003 and 2010, with nearly $278 billion disbursed during that period.

"Far too much of that money had been wasted," he said.

The tax credits are based on a person's estimate of salary for the coming year. At the end of that year, tax collectors are supposed to compare the person's actual earnings against the estimate and reclaim any overpayments.

Smith said the revenue department conducted only about 34,000 checks a year on individuals who received what were considered "high risk awards."

Even those found to have been overpaid often have not repaid the money, he said.

The treasury has already written off more than $1.62 billion in unpaid debts from tax-credit claimants and that could rise to $10.6 billion, Smith said.

In the coming months, Smith said, people receiving the tax credits will have to provide proof that their children are receiving child care or are in school full-time.

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