Six times as much tax lost to crime as to avoidance
Nearly six times as much tax revenue is being lost as a result of illegal activity as through tax avoidance, official figures show.
In fact, some £2.7billion was lost in 2013-14 to avoidance (down from both £2.8bn the previous year and an estimate of £3.1bn), compared with £15.7bn from illegal activity.
This latter figure is made up of £5.1bn from criminal attacks; £4.4bn from evasion and £6.2bn from the ‘hidden economy,’ show the figures from HM Revenue & Customs.
“Tax evasion and other illegal activity are costing the Exchequer nearly six times as much as tax avoidance,” said the Chartered Institute of Taxation, reflecting on the figures.
“HMRC needs to put more effort into investigating and prosecuting those who seek to evade tax…[and] the government are right to have put extra resources in this direction.”
But there was criticism last year from tax experts due to the avoidance calculation being based only on avoidance ‘disclosed under DOTAS,’ and the institute cited another omission.
It said: “HMRC’s avoidance figure does not include a lot of what gets described as avoidance in the newspapers, especially in relation to multinational businesses.
“This is because, as HMRC puts it, it ‘is the result not of frustrating UK law but of exploiting the international tax framework’. This is the kind of activity governments are rightly working to tackle internationally.”
As to the activity that HMRC should tackle, the CIOT pointed to the billions of public funds still being lost thanks to errors and carelessness by taxpayers.
“More than £6bn a year”, said CIOT’s John Cullinane. “HMRC are still not doing enough in this area.
“There should be a stronger focus on education and making it easier for people to complete their tax returns. Additional simplification measures would also help reduce errors as well as making avoidance more difficult.”
All the latest figures are from the government’s annual estimate of the ‘tax gap’ – the difference between tax collected and that which, in HMRC’s view, should be collected.
According to the just published estimate for 2013-14, the tax gap is approximately £34billion a year, creating an estimated shortfall of 6.4% of total tax liabilities.
Mr Cullinane said: “Thirty-four billion is a large amount of tax not to be collecting, but while the headline figure is unchanged it is a slightly lower share of the total tax HMRC think is due.
“The 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 per cent of total tax liabilities, more than double the percentage share in the UK.”
