HMRC has published its statistics on the ‘tax gap’ for 2013/14, showing that the tax gap has fallen from 6.6% to 6.4%, with an overall total gap at £34bn. The annual figures (see www.bit.ly/1L4P22s) show that the tax gap, which is the difference between the amount of tax due and the amount collected, has fallen from 8.4% in 2005/06. HMRC said the reduction in the percentage tax gap since 2005/06 represents an additional £57bn in cumulative tax collected over the eight-year period; and claimed that this reflects its approach of ‘delivering steady and sustained progress’. Financial secretary to the Treasury David Gauke commented that the UK ‘has one of the lowest tax gaps in the world’. He added: ‘If the tax gap percentage had stayed at its 2009/10 value of 7.3%, £14.5bn less tax would have been collected. There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low.’
While the HMRC figures were welcomed by many in the profession, some concerns remain. Frank Haskew, head of ICAEW’s tax faculty, called for assurances from the chancellor in next month’s Autumn Statement that HMRC would be protected from further budget cuts. He said: ‘Given the substantial reduction in staff and budget over the years, HMRC deserves credit for making this progress and we believe that with additional resources the tax gap could be made even smaller.’
George Bull, senior tax partner at RSM (formerly Baker Tilly), said: ‘While the percentage of the tax gap has been reducing year on year, the value of uncollected tax remains stubbornly high. One interesting point to note is that the overall corporation tax gap has reduced by half from 14% in 2005/06 to 7% in 2013/14. The report suggests that larger businesses have a lower tax gap than smaller businesses and they appear to be more compliant. It’s therefore all the more surprising that the government is proposing changes to the way it deals with the tax affairs of large businesses, which will impose disproportionate administrative burdens on the compliant majority. The government has also recently consulted on extending its data gathering powers to tackle the hidden economy, which according to this report costs the exchequer an estimated £6.2bn in uncollected tax.’
The CIOT noted that the figures suggested tax evasion and other illegal activity are costing the exchequer ‘nearly six times as much as tax avoidance’. John Cullinane, CIOT tax policy director, commented: ‘The CIOT has long argued that HMRC needs to put more effort into investigating and prosecuting those who seek to evade tax. The figures also show how much is being lost to public funds as a result of errors and carelessness by taxpayers – more than £6bn a year. [However, the £34bn tax gap] 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% of total tax liabilities, more than double the percentage share in the UK.’
HMRC has published its statistics on the ‘tax gap’ for 2013/14, showing that the tax gap has fallen from 6.6% to 6.4%, with an overall total gap at £34bn. The annual figures (see www.bit.ly/1L4P22s) show that the tax gap, which is the difference between the amount of tax due and the amount collected, has fallen from 8.4% in 2005/06. HMRC said the reduction in the percentage tax gap since 2005/06 represents an additional £57bn in cumulative tax collected over the eight-year period; and claimed that this reflects its approach of ‘delivering steady and sustained progress’. Financial secretary to the Treasury David Gauke commented that the UK ‘has one of the lowest tax gaps in the world’. He added: ‘If the tax gap percentage had stayed at its 2009/10 value of 7.3%, £14.5bn less tax would have been collected. There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low.’
While the HMRC figures were welcomed by many in the profession, some concerns remain. Frank Haskew, head of ICAEW’s tax faculty, called for assurances from the chancellor in next month’s Autumn Statement that HMRC would be protected from further budget cuts. He said: ‘Given the substantial reduction in staff and budget over the years, HMRC deserves credit for making this progress and we believe that with additional resources the tax gap could be made even smaller.’
George Bull, senior tax partner at RSM (formerly Baker Tilly), said: ‘While the percentage of the tax gap has been reducing year on year, the value of uncollected tax remains stubbornly high. One interesting point to note is that the overall corporation tax gap has reduced by half from 14% in 2005/06 to 7% in 2013/14. The report suggests that larger businesses have a lower tax gap than smaller businesses and they appear to be more compliant. It’s therefore all the more surprising that the government is proposing changes to the way it deals with the tax affairs of large businesses, which will impose disproportionate administrative burdens on the compliant majority. The government has also recently consulted on extending its data gathering powers to tackle the hidden economy, which according to this report costs the exchequer an estimated £6.2bn in uncollected tax.’
The CIOT noted that the figures suggested tax evasion and other illegal activity are costing the exchequer ‘nearly six times as much as tax avoidance’. John Cullinane, CIOT tax policy director, commented: ‘The CIOT has long argued that HMRC needs to put more effort into investigating and prosecuting those who seek to evade tax. The figures also show how much is being lost to public funds as a result of errors and carelessness by taxpayers – more than £6bn a year. [However, the £34bn tax gap] 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% of total tax liabilities, more than double the percentage share in the UK.’
