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The Low Incomes Tax Reform Group (LITRG) has published a report on "Digital Exclusion" and the impact of the government's "digital by default" policies on taxpayers, Tax Credits claimants and National Insurance contributors who were digitally excluded. The study which formed the basis of the report found that nearly half of those seeking help with tax and tax credits did not have access to a computer, and claimed that It there was new evidence that government efforts to move services and transactions online are disadvantaging older people, those with disabilities and the self-employed in particular.

The report says:

"Despite increased access to the Internet among the population, there is a 'digital divide' between those who do not use the Internet and those who make regular use of it. Through lack of access, lack of skills, age, geography or choice, non-users are at risk of marginalisation as [government] services become 'digital by default'."

Speaking for LITRG, Anthony Thomas, who is President of the Chartered Institute of Taxation, said:

“Doing business online wherever possible makes good economic and administrative sense for both state and citizen. So it is understandable, and welcome, that a central strand of the Government’s public services agenda is to encourage people to do their government business online – the ‘digital by default’ strategy. 

There are several segments of the population, though, who are either unable to engage digitally or who struggle to do so – the ‘digitally excluded’. These are the people who are losing out as more and more government services and transactions are only available – or only easily available – to those with computers, who are IT-literate and have a decent Internet connection. Older people are particularly affected.

The main thrust of our report’s recommendations is that ‘digital by default’ must involve an inclusive approach and not a mandatory one. Citizens should not be forced to fulfil their obligations online if they are unable to do so or will find it excessively difficult. A mandatory approach could further compound exclusion issues. This includes compulsory online filing of tax returns by businesses. As the case studies in our report show, many micro-businesses and self-employed people operate effectively in business without a computer, far less an internet connection."

The vast majority of small businesses are now legally required to file their PAYE and VAT returns online. In other words, digital filing is mandatory, except in a few cases - see for instance Reminder - Only 1 Month Left to File Employers' Annual Returns.It is perhaps appropriate to quote Cabinet Office Minister Francis Maude, commenting on the matter in November 2010:

"...this does not mean we will abandon groups that are less likely to access the Internet. We recognise that we cannot leave anyone behind. Every single government service must be available to everyone - no matter if they are online or not."

LITRG's report suggests that there is a significant number of businesses and taxpayers who are struggling to deal with mandatory online filing, and to whom Mr. Maude's words must seem particularly at odds with the facts on the ground.