HMRC’s tax evasion figures are wrong, says report

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

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.

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