HMRC’s tax evasion figures are wrong, says report

The evasion figure is almost four times HMRC’s estimate and rising.

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The evasion figure is almost four times HMRC’s estimate and rising

Tax evasion is now at a scale of £80bn a year, contrary to the taxman’s figures, according to a new report for the Public & Commercial Services union launched at the Labour Party conference in Manchester.

HMRC’s figures are shockingly out of line, the accountant claims in the study, ‘The tax gap: tax evasion in 2014 – and what can be done about it’.

The evasion figure is almost four times HMRC’s estimate and is rising, says the research by tax expert Richard Murphy for the civil servants’ union.

He argues that the total tax gap – which includes tax debt (owed tax), avoidance (dodging tax within the law) and evasion (illegal tax dodging) – is now at a worrying £119bn and growing. Moreover, the level of tax evasion could hit £100 billion by 2018/19.

The report points to the trend of HMRC simply writing off huge amounts of tax debt as irrecoverable or just abandoning pursuing it.

Although tax evasion has gone down, this is largely because the level of corporation tax has gone down: there is less tax to pay, and thus less tax to theoretically avoid – an automatic statistical blip. This puts paid to misleading government claims that they’ve cracked down on tax dodging.

Commenting on the findings, PCS general secretary Mark Serwotka said:

“While politicians of all parties are falling over each other to claim there is less money around, this important report reveals why and how we can tackle it.

“Collecting even a fraction of these stolen billions would change the debate about public spending overnight and allow much-needed investment in our communities instead of more damaging cuts.”

The level of cuts to HMRC might help explain the rise in tax evasion: in 2005, HMRC had 92,000 staff. It has now less than 62,000 and by 2016 it is expected to have around 52,000. That’s a 45 per cent reduction in the service’s workforce.

In June, it was announced that a further 23 offices would close, following last year’s decision to close all of its 281 walk-in enquiry centres – against the majority of views expressed in its consultation.

Richard Murphy, who runs Tax Research UK, said:

“To take this issue seriously, and instead of investing heavily in defending its own inadequate tax gap methodology (as it has done over the last few years), it is time for HMRC to sit down and talk about how its estimates can be improved to take into account the very real, and logical, criticisms I make.

“We need considerably more investment in HMRC if we are to have the fair and just tax system we need in this country that ensures that everyone pays the right amount of tax, in the right place, at the right rate and at the right time, which should be HMRC’s goal if it is to not just to collect tax but play its full part in building a tax system that is the foundation of a fair market economy where everyone competes on a level playing field as a well as a fair society where the tax system delivers social justice, not least through redistribution of income and wealth.”

You can read the full report here.

10 Responses to “HMRC’s tax evasion figures are wrong, says report”

  1. Leon Wolfeson

    We’re turning into Greece Mk II. But don’t worry, Cameron is busy…making much of the evasion legal. And Labour have not given detailed plans to fight it.

  2. nodbod

    I have had one job for the past seven years. I am salaried and pay PAYE. My job involves traveling for which I have a company car on which I pay tax. This year, on a Friday, I received two separate reviews of my tax including the proportion for my car. They came in the same envelope. The first made reference to an underpayment in the previous year and so my tax code was drastically lowered. The second made reference to my overpayment in the previous year and so raised my tax code above my tax code that I had been paying. The figures used on the second code bore absolutely no relevance to the figures on the first code. I appeared to be winning so shrugged my shoulders, I had a result.
    The very next Friday I got the code that linked the other two together. Three codings in a week and the portion allocated for my car bears absolutely no relevance to the purchase price or residual value.
    If they cannot get my tax codes correct and I have the most straight forward payment in the world, then what hope of them ever catching up on big business evasion.
    As you say, despite his claims to the contrary, Camoron and Osborne have actually made it easier to avoid tax (well documented and a whole Panorama program earlier in the year).
    I get the real impression that they have no intention of doing anything about it at all.

  3. Leon Wolfeson

    No, less of something (because much of it is now legal) | Easier to catch. But that’s an excuse I’ve…oh wait, I have seen it before.

    Tip – They’ve slashed budgets to the bone, things can and will go wrong in that case! The people hunting i.e. corporate tax evasion were revenue positive, and fired anyway!

  4. JoeDM

    There is nothing wrong with arranging one’s affairs in a tax efficient way within the law eg save using an ISA and pension contributions, etc.

    Why would you expect anyone to pay more tax than is actually due!!!

  5. sarntcrip

    labour are not yet the government until the electIon campaign proper starts they can keep their powder dry however tax evasion/avoidance fraud has risen exponentially since the calaMity coalition the only tax loophole osbourne closed waste one which ordinary people could use to buy cheAp CdS FROM THE CHANNEL ISLANDS SAVING PEANUTS WAS MORE AN ACT OF SPITE AND A SMOKESCREEN ACROSS ALL THOSE AVOIDANCE SCHEMES WHICH HE AND MANY OTHER WEALTHY TORY DONORS AND CORPORATIONS USE TO AVOID TAX IT IS TAX AVOIDANCE WHICH COSTS BILLIONS MORE THAN BENEFIT FRAUD AND IS THE WAY TO AVOID THE AUSTERITY
    LABOUR FOOLISHLY SEE AS WORTH CONTINUING FOR POLITICAL CREDIBILITY CLOSING LOOPHOLES AND IMPOSING THE VICTIMLESS ROBIN HOOD TAX WOULD HAVE A GREAT DEAL MORE CREDIBILITY

  6. sarntcrip

    JOE not the same thing at all offshore tax havens cozy arrangements with hmrc to allow huge corporations to avoid billions are simply wrong and if dealt with could avoid the austerity disproportionately affecting those with least and vulnerable groups like the disabled

  7. Leon Wolfeson

    Ah, sarntcrip…but if it’s now legal, is it evasion? See, HMRC have been ordered to reduce the scary numbers, so they have.

    And sorry, no, the channel islands loophole was a gross abuse which hurt UK retailers and it needed closing very badly. If you want a real issue, look at the way in which the UK government (despite an EU ruling allowing it from 2015) does not intend to lower the VAT on eBooks to match paper books.

    I also argue that the system is broken, and “closing loopholes” won’t work. We need to start with a blank slate and redesign it rationally. Same base rates to start, but each and every proposed exemption and alteration would be examined.

  8. Leon Wolfeson

    I expect people to pay the tax due. There’s a sharp difference, and that’s what’s being talked about.

    I also expect international action on tax evasion. And to close the loopholes.

  9. Joe

    You do realise that tax evasion is the ILLEGAL non-payment of tax, right? Not within the law at all.

  10. blarg1987

    As others below have said there is a big difference, the main difference is intent.

    Two people set up companies doing the exact same thing with the exact same amount of money etc. Person A follows the standard tax guidelines and gets the appropriate relief’s and pays the tax due on profits etc.

    Person B sets up a sub company which he uses to “lend” to the company he set up though this he avoids paying taxes that person A pays.

    However Person B has set up a complex system of avoiding the payment of tax, which was the intent compared to person A who pays there tax in the most efficient way possible which is the simplest way.

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