The tax gap in Britain is shrinking as the HM Revenue & Customs throws more resources at companies and individuals who pay less than they should.
HMRC estimates the tax gap – the difference between amount of tax that should have been collected and what actually landed in the Treasury coffers – as £32 billion in 2010-11.
These are the latest figures available, and show a trend for a narrowing gap as the amount is now 6.7% of tax due, down from 7.1% in 2009/2010.
The largest deficit is blamed on underpaid income tax, national insurance and capital gains tax, which makes up 45% of the gap – £14.4 billion. Much of the rest is owed by businesses.
Lin Homer, the chief executive of HMRC said a crackdown on tax management strategies was mainly responsible for reducing the figure.
Pressure to pay tax
“Our determination to support the honest majority and to crack down on evasion, avoidance and fraud have kept downward pressure on the tax gap,” she said.
“We are determined to do more and we are devoting increasing resources to pursuing those who do not pay the tax they owe, while making it easier for people and business to comply with their tax obligations.”
The tax gap is calculated by analysing data from estimates of what should be collected under the different taxes.
Tax is unpaid for many reasons, including deliberate avoidance, mistakes, crime and if a business goes insolvent owing money to HMRC.
David Gauke, the exchequer secretary said: “These tax gap figures show that the vast majority of people and businesses pay the tax they owe on time. Last year, £468.9 billion was collected, including £13.9 billion brought in through HMRC’s work policing the rules.
Secret financial activity
“Every pound of tax that is not collected puts a greater burden on honest taxpayers and public services, so the government and HMRC will continue to work together to make it harder for individuals and businesses not to pay the taxes that are due.
“We are determined to reduce the tax gap and have made £917 million available to help HMRC tackle avoidance and evasion.”
In recent months, HMRC has instigated campaigns against target groups to raise more tax, including lawyers in London, the medical profession, plumbers and other tradespeople.
A sustained effort to track down earnings and assets held offshore is expected to raise more than £3 billion as banks and governments in Liechtenstein and Switzerland lift the veil of secrecy on financial activities.