The individual tax gap is £400 million

This is a bit of a blow for Ritchie I would think. The individual tax gap is not the £13 billion he claims, it\’s £400 million.

Now, recall, his report, the Missing Billions. There\’s £12 billion of corporate avoidance, £13 billion of individual. And now today we have this:

About £12.6bn tax will be paid unnecessarily this year, according to new calculations, because Britons fail to make the most of tax shelters, allowances and reliefs.

Recall Ritchie\’s insistence that tax compliance is what matters. Using the allowances and reliefs expressly introduced by Parliament in the manner Parliament meant them to be used.

So, we have by his estimate £13 billion not pasid in tax because some people are not tax compliant. We also have this new number, £12.6 billion overpaid because people are not tax compliant. By simple arithmetic thus the individual tax gap is £400 million.

Not going to get much deficit reduction out of that with another 10,000 at HMRC are we?

Now you could say that overpaying tax is different from underpaying it. But even so both are not tax compliance as Ritchie defines it, paying the right amount of tax but no more according to the intentions of Parliament.

3 comments on “The individual tax gap is £400 million

  1. I’d take the £12.6bn figure with a pinch of salt: it’s being promulgated by people in the business of selling tax-planning services. I haven’t found detailed figures, but one chunk of the potential saving will be the amount of tax relief people could get by maximizing their pension contributions (to £50,000 or 100% of earnings). For many people that’s not a realistic proposition.

    Incidentally, the same people reported £13.5bn of unnecessary tax paid last year.

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