HMRC consultation on Big Data approach to address 'hidden economy'

Interesting to read the media coverage of plans by the UK tax agency, HMRC, to "bulk collect" data on internet transactions as a drive to identify businesses selling goods and services that are avoiding tax payments. This 'hidden economy' of undeclared income is estimated at £5.9bn or 17% of GBP. This coverage, and other similar articles highlight some interesting angles:

• HMRC plan to collect names, addresses and revenue of sellers from a range of internet sites [such as Ebay, PayPal, AirBnB, Justeat] and match these to tax returns to identify discrepancies
• Un-named 'senior tax accountants' warned "it could lead to "fishing expeditions" which could see small businesses and modest hobbyists sent "frightening" letters demanding they payment of taxes which they do not owe."
• The accountants also "warned that the "huge" databases will have significant security and privacy risks."

Whilst most of the coverage identifies a Treasury forecast that this could raise an additional £860m in taxes, most detail is directed at the risks and downsides of the exercise. Though most of these seem to be without much fact-based detail. The coverage doesn't really highlight that the initiative is at an evaluation stage and HMRC have initiated a consultation exercise to allow input as to the scope of data gathering, the best approach and how to minimise costs of fulfilling data requests.

However this consultation highlights to me a clear example of a solid big-data project:

• recognition that data can help with a specific business issue - in this case unreported income - something with quantifiable value, even if estimated
• an understanding that external data can provide significant improvement in tackling this issue, and that bulk-data collection provides a highly efficient approach (see comments below). New data sources are a fundamental way of better exploiting an organisation's internal data. 
• presumably HMRC have already conducted a pilot exercise, so they have a feel for the practicality of doing this at scale - both in techniques and outcome

The consultant document, sets out a range of questions, but includes some fundamental details of the suggested approach, recognising that "data can be particularly powerful" and detailing some specific benefits:

• efficiency by collecting information in bulk about a large numbers of traders
• minimising the burden on business, by obtaining data in bulk from a few sources rather than broad-based reporting requirements.
• it recognises the value of third party data as an independent check against the data taxpayers themselves report" i.e. a corroborative source
• the paper highlights HMRC’s ambition, to present taxpayers with data to check rather than forms and tax returns to complete.

This whole approach indicates that the HMRC is more forward thinking than many commercial organisations, by tackling a practical issue, using data, in an innovative but very practical way.