Closing the Tax Gap!

HMRC have just published a paper Closing the tax gap: HMRC’s record at ensuring tax compliance in response to a Treasury Select Committee challenge on the value, or otherwise, of tax gap statistics. The annual tax gap is the amount of tax that could be collected and is not.

HMRC defends the usefulness of the tax gap work as it helps them in quantifying types and causes of non-compliance by tax regime and customer group. HMRC also defends the value of the tax gap figure they have calculated in the light of rival calculations which suggest much higher figures which HMRC believes are misleadingly high.

HMRC believes that the tax gap is £35bn whereas the Tax Research UK figure has it at £123bn.

The breakdown of the figure from HMRC is:

Unpaid tax 4bn
Avoidance 5bn
Hidden economy, evasion etc 26bn

While the equivalent figures put forward by Tax Research UK are:

Unpaid tax 28bn
Avoidance 25bn
Evasion 70bn

So who can we believe and what are HMRC going to do about those who clearly view tax in all its forms as a discretionary matter and not for them?