Loopholes, evasion and other flaws in the tax system are costing the country about £40bn in revenue a year, according to an official estimate likely to inflame arguments over how to repair Britain’s biggest ever peacetime deficit.
Loopholes, evasion and other flaws in the tax system are costing the country about £40bn in revenue a year, according to an official estimate likely to inflame arguments over how to repair Britain’s biggest ever peacetime deficit.
The analysis, released with last week’s pre-Budget report, has sparked anger from campaigners, amid concern from advisers and officials that identifying “a pot of gold” of uncollected tax will erode public support for the tough decisions on tax and spending required to narrow the deficit.
HM Revenue & Customs’ first ever estimate of the overall “tax gap” reveals that 8 per cent of the expected tax due goes uncollected for a variety of reasons ranging from simple errors to criminal attacks. It says the scale of the gap compares “favourably” with similar estimates produced by other countries such as the 14 per cent gap in the US, the 10 per cent gap in Sweden and 6 per cent in Denmark.
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Advisers expressed scepticism about the tax gap calculations, however. Francesca Lagerberg of Grant Thornton, a professional services firm, said the Revenue risked chasing after “mythical amounts”. Bill Dodwell of Deloitte, another professional services firm, said: “It really is finger in the air stuff.”
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