‘Five times as much lost to fraud as to avoidance’
New figures from HM Revenue & Customs reveal that almost five times more tax revenue is lost as a result of illegal activity than through avoidance.
In fact, the figures show £3.1bn was lost in 2012-13 as a result of avoidance, compared with a total of £15.4billion from criminal attacks, evasion and the hidden economy.
Experts think that HMRC needs to put “more effort” into investigating and prosecuting tax evasion which, unlike avoidance, is illegal as it involves fraud or deliberate concealment.
The Chartered Institute of Taxation also says it believes that HMRC is not “doing enough” to tackle taxpayer error and carelessness and wants to see “simplification measures”.
If they are unveiled in December’s Autumn Statement, such streamlining measures would help to reduce mistakes and frustrate avoiders, who appear to be avoiding less.
“There’s still more work to do but our continued drive to tackle avoidance means that avoidance is down,” said David Gauke, the Financial Secretary to the Treasury.
Mr Gauke was referring to the HMRC figures showing that avoidance has reduced from both the £3.4bn in the previous tax year and the estimate of £4bn published a year ago.
But not everyone backs the figures, which are the Revenue’s latest on the tax ‘gap’ – the difference between the amount it receives and the amount it says should be paid.
“Avoidance [in the ‘tax gap’ statistics] is now defined as ‘disclosed under DOTAS,’” reflected Richard Murphy, the tax campaigner. “This frankly beggars belief.
“[So]…if people get round DOTAS – because for example some well-known companies undertake their tax avoidance outside the UK – then HMRC turn a blind eye to that avoidance altogether when estimating the tax gap.”
He added: “To suggest that there is massive behavioural change, such as a significant fall in tax avoidance, on such as a narrow basis as registration for DOTAS schemes is seriously misleading.”
According to HMRC, the tax gap in 2012-13 was approximately £34bn – or 6.8% of what should have been paid, compared with 6.6% in 2011-12.
