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PCS tax gap estimate flawed, says HMRC

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The Public and Commercial Services (PCS) Union has released its report into the UK tax gap for 2013/14, which it estimates at £119.4bn in total. The report, Tax evasion in 2014 and what can be done about it, was written by tax campaigner Richard Murphy FCA of Tax Research UK, and ‘includes reductions in the estimates of tax avoidance and tax debt, but a significant increase in the estimated tax loss from evasion’.

The previous PCS report, published in 2010, estimated the tax gap at £120bn; while the current estimate ‘includes significant new data and a much more comprehensive analysis of tax evasion [and] shows that tax evasion is higher than previously estimated. It concludes that the government should tighten up legislation and reverse the counterproductive cuts in HMRC staffing’.

However HMRC criticised the PCS figure, insisting that it is ‘not complacent and will continue to exert maximum downward pressure on the tax gap’. HMRC’s own estimate of the tax gap in 2011/12 was £35bn, a figure that has been fairly constant since 2005/06 (HMRC has not yet published estimates for later years).

A spokesperson told Tax Journal: ‘The PCS tax gap estimate is over-inflated, flawed and muddled. The IMF has endorsed HMRC’s estimate of the gap at £35bn, which is in line with the code of practice for official statistics. Since 2011, we have brought in £60bn from tackling tax-dodging alone. Ninety per cent of all tax liabilities are paid and the vast majority of UK taxpayers, both large and small, pay their dues. HMRC’s ability to collect what’s due is improving, which even the PCS recognises.’