Freelancers' Shop

'Tax Gap' shows five times as much lost to fraud as to avoidance

by Susie Hughes at 13:14 17/10/14 (News on Business)

The tax gap, which is the difference between the amount of tax due and the amount collected, was 6.8 per cent of tax liabilities, or £34 billion, in 2012-13.

This compares with a revised estimate of 6.6 per cent in 2011-12. The long-term trend is downward, with the tax gap falling from 8.5 per cent in 2005-06, according to HM Revenue and Customs (HMRC). However, the Chartered Institute of Taxation (CIOT) has drawn attention the figures which show that almost five times more tax revenue is lost as a result of illegal activity than through tax avoidance. Financial Secretary to the Treasury David Gauke said: “Since 2010-11 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion. Today’s figures show that there’s still more work to do but our continued drive to tackle avoidance means that avoidance is down. “In 2012-13 HMRC achieved a compliance yield of £20.7 billion, rising to a record breaking £23.9 billion in 2013-14. “The UK has one of the lowest tax gaps in the world but HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years.” Illegal The tax gap also includes the tax owed by companies that have become insolvent – making it uncollectible, as well as low level errors made in tax returns. The part of the gap due to tax avoidance fell from £3.4 billion to £3.1 billion. The CIOT points out that £5.4bn was lost to criminal attacks, £4.1bn to evasion and £5.9bn to the ‘hidden economy’, a total of £15.4bn from illegal activity. Advertisement Patrick Stevens, CIOT Tax Policy Director, said: “These figures suggest that tax evasion and other illegal activity are costing the Exchequer nearly five times as much as tax avoidance. The CIOT has long argued that HMRC needs to put more effort into investigating and prosecuting those who seek to evade tax. The Government are right to have put extra resources in this direction, as well as tackling artificial and abusive attempts to avoid tax. “The Government has estimated that changes in this year’s Finance Act should now bring in over £7bn of tax thought to have been avoided in previous years. This is far more than the amount believed to have been avoided in 2012-13. “These figures also show how much is being lost to public funds as a result of errors and carelessness by taxpayers - more than £7 billion a year. HMRC are still not doing enough in this area. There should be a stronger focus on education and making it easier for people to complete their tax returns. Additional simplification measures would also help reduce errors as well as making avoidance more difficult. “£34 billion is a large amount of tax not to be collecting, and there appears to have been a small uptick after years of the ‘tax gap’ figure falling. However the figure still compares well to international jurisdictions. The most recent estimate of the tax gap in the United States, for example, puts the tax gap there at more than 14 per cent of total tax liabilities, more than double the percentage share in the UK.” Tweet -- If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'. - Susie Hughes © Shout99 2014

Printer Version

Copyright 1999-2018, Shout99.com | All Rights Reserved
Privacy Notice and Terms of Use