Britain has a £33 billion tax gap – but does the imagined amount of missing money really exist?
HM Revenue & Customs estimates the tax gap every year.
Officials calculate the amount of tax that HMRC reckons should be paid and deducts the actual amount received to arrive at the gap.
HMRC says measuring the gap is a useful tool for understanding how much money is lostto tax evasion.
“The tax gap figure has been produced by analysts working within HMRC, in line with the values, principles and protocols set out in the code of practice for official statistics,” says HMRC.
“We use a range of internal and external data and different analytical techniques to produce annual estimates, which we revise as more accurate data becomes available. These are our best estimates based on the information available, but there are many sources of uncertainty and potential error.”
So, HMRC admits the figures are not reliable.
The amount for 2016-17, the latest tax gap data, shows how the £33 billion of ‘lost’ tax is made up.
Jon Thompson, HMRC’s chief executive, said: “The UK is the only country in the world to regularly publish their tax gap in detail and at 5.7%, it remains at its lowest for five years. I am pleased that the downward trend shows HMRC and HM Treasury’s continued hard work to tackle evasion and avoidance is working.
“HMRC is also working hard to help taxpayers get their tax right by offering support and investing in digital services to improve businesses’ record keeping and reduce errors.”
Careless taxpayers and criminal attacks
Only £1.7 billion is attributed to avoidance, while £9.2 billion is blamed on taxpayers failing to take reasonable care over their filings. Another £5.4 billion is lost to ‘criminal attacks’.
The taxes involving the largest losses are income tax, national insurance contributions and capital gains tax.
Mel Stride, Financial Secretary to the Treasury, said: “These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.
“Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005-06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.”