David Cameron has announced a war on 'welfare cheats'. But the £5.1bn welfare gap - only £1.5bn of which is cheating - is dwarfed by the £40bn tax gap.
David Cameron’s Sunday Times article yesterday signalled a “war on welfare cheats”. But the Coalition is silent on the larger problem of tax cheats and HM Revenue and Customs (HMRC) have announced that they will no longer produce some of their key stats on enforcement.
David Cameron yesterday described welfare and tax credit overpayments as the “one area of ingrained waste that outranks all others”. He wrote:
“Simply shrugging our shoulders at benefit fraud is a luxury we can no longer afford – which is why Iain Duncan Smith is working on the radical steps we can take to deal with it.”
But as the Guardian reports today:
“Some coalition ministers point out that of the £3.1bn of identified fraud and error in the benefits system in 2009-10, only £1bn is attributable to fraud, as opposed to system failure. Of the £2.1bn identified in the tax credit system in 2008-9, only £460m is attributable to fraud.”
Meanwhile, before the election in March, HM Revenue and Customs updated its ‘Measuring tax gaps 2009‘ report and outlined that, “The size of the UK tax gap is estimated to be around £40 billion in 2007-08.” The tax gap is “the difference between tax collected and that, which in HMRC’s view, should be collected.” Only £3 billion is attributed to error with £5 billion due to criminal attacks, £7 billion due to tax evasion and a further £7 billion due to tax avoidance.
Chart: The welfare and tax gaps including proportion due to systemic error
The gap includes £11.5 billion from VAT, £8.9 billion from corporation tax including £3.1 through “avoidance by Very Large Businesses”, and £7.2 billion from inaccurate self-assessment returns from individuals. Accountant and blogger, Richard Murphy, estimates that the gap is closer to £120 billion.
During the general election, the Liberal Democrats set out plans to raise £4.6 billion from “anti-avoidance measures”. But the Coalition has been largely silent since. In the Budget, George Osborne’s only mention of “tax avoidance” came in a reference to the coalition’s decision to raise capital gains tax while the Budget red book made only the vaguest of noises:
“The Government is committed to tackling tax avoidance and intends to develop strategic responses to address long-standing avoidance risks.”
As reported in the Observer yesterday, HMRC have – since May – stopped publishing information on “the number of prosecutions against taxpayers and the success rate of court actions pursued by HMRC”.
110 Responses to “Cameron’s one-sided crusade on cheats”
Happyass Monkey
RT @leninology: RT @their_vodka: Cameron attacks benefit fraud but coalition strangely silent on billions tax cheats… http://bit.ly/aSTpeU
Mr. Sensible
I see that in the news today Cameron’s looking at using credit agencies to clamp down on benefit cheats.
I rather think the ‘cut benefits’ brigade need a bit of a reality check; earlier yesterday, we read about the survey of the labour market by the CIPD, which showed that redundancy is forecast to hit a larger proportion of the workforce.
On the question of tax avoidance, Will, this may be slightly off topic, but I did some reading on administration law in the light of events with Portsmouth football club, and I think the previous government may have made a mistake here. According to what I read on Wikipedia,
http://en.wikipedia.org/wiki/Administration_(British_football)#cite_note-25
the 2002 Enterprise Act, amending the 1986 Insolvency Act, removed HMRC’s preferential right to recover taxes when a business fails. 1 of the results of which has been the ‘Football Creditors Rule’, which for those of you who don’t know means that when a club is in trouble, football creditors; other clubs, players, and their agents, get accounted for first, and other creditors, including the Revenue are having to fight over the rest. Any thoughts on this, Will?
Nadia
RT @their_vodka: Cameron attacks benefit fraud but coalition strangely silent on billions tax cheats walk off with http://bit.ly/aSTpeU #condem
Jenny Jones
If Cameron wants fair government, why not crack down on tax cheats too, or is that biting the hand that feeds tories? http://bit.ly/aVzL2W
Tom Chance
Of the £40bn, using the table on page 8 it looks like (perfectly legal) avoidance is estimated at 4.5bn, suggesting that the remaining £35.5bn is evasion. That’s a pretty surprising breakdown!