Pretty much solved really

HMRC’s figures from 2015-16 showed that 6% of tax due in Britain went uncollected – a whopping £34bn. About £1.7bn of this came from avoiding tax by taking legal steps to minimise one’s liability and an estimated £5.2bn came from evading tax illegally. With our public finances strained, it is an insult to diligent taxpayers that multinational firms and high-net-worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill.

By the time we’re down to a couple of percent we’re pretty much done with government work aren’t we?

46 comments on “Pretty much solved really

  1. If one can describe £34bn. as “whopping”, perhaps the UK shouldn’t hand over a similar sum to the EU just to be nice.

    If £1.7bn. is attributable to legal steps being taken in order to reduce tax liability, one should not include this amount in the figure for tax due unless one subscribes to Elynomics.

  2. From Tim’s quoting of the Guardian, we have: “HMRC figures from 2015-16 showed that 6% of tax due in Britain went uncollected – a whopping £34bn. About £1.7bn of this came from avoiding tax by taking legal steps to minimise one’s liability …”

    That means, if the Guardian itself quotes/summarises correctly, that HMRC view £1.7bn not legally due as part of their overall figure of tax due and not collected (£34bn).

    If HMRC is wasting Taxpayers’ funds chasing money they classify as (ie admit is) not due (and/or whining about it), that might explain part of their problem in collecting what is due.

    Best regards

  3. ” it is an insult to diligent taxpayers that multinational firms and high-net-worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill”

    Except nowhere in the report does it say that the tax gap is down to this. In fact a large part is due to people “failing to take care to properly record transactions”, which sounds more like a small business than a multinational.

  4. “https://leftfootforward.org/2018/02/corporations-benefit-from-a-healthy-functioning-society-but-think-they-shouldnt-have-to-pay-for-it/”

    I couldn’t find the other link “society benefits from healthy functioning corporations” but maybe they are still working on it

  5. “I couldn’t find the other link “society benefits from healthy functioning corporations” but maybe they are still working on it”

    Sounds like protection racket speak to me. I believe Obama’s “You didn’t build that” speech ran along the same lines.

    The left knows no bounds when it comes to taking credit for other people’s labour.

  6. “By the time we’re down to a couple of percent we’re pretty much done with government work aren’t we?”

    This is the key. There is a HUGE difference between chasing down a lump sum of £1.7B and trying to recover £17k from each of 100k organisations or worse. Especially if it’s down to poor record keeping…

  7. ‘complex myriad of loopholes and accounting gymnastics’

    Guardianspeak for “we don’t understand.”

  8. There’s a wry hilarity to the way that, when benefit fraud is mentioned, the Guardianista reaction is that “less than 1% of the bill can be proven to be fraudulent, it’s not a problem at all, pay no attention to that man behind the curtain!”

    But when less than 1% of the tax bill is alleged to be “illegally evaded”, then the sky is falling down, the world is ending, dogs and cats are living in sin together, and Something Must Be Urgently Done about this massive problem.

  9. Bravo JL

    I think my favourite recent piece of hypocrisy was the FT reporting on their own gender pay gap: apparently it is much improved compared to when the paper was founded 130 years ago.

  10. ‘…and an estimated £5.2bn came from evading tax illegally.’

    Is it possible to evade tax legally?

  11. ‘…whopping £34bn. About £1.7bn of this came from avoiding tax by taking legal steps to minimise one’s liability and an estimated £5.2bn from evading tax illegally.’

    So never mind the £27,1bn not being collected and asking why not, let’s obsess about the £6,9bn being avoided and ‘illegally’ evaded.

    Someone needs to look up the word, priority.

  12. Come on guys, HMRC have their work cut out chasing minute amounts of miscalculation in the minimum wage. Why should they go after biggish numbers when there are still literally pennies at stake for hard-working people on minimum wage?

  13. @sloop ; from memory there’s a black market tax loss which is about the same as illegal tax evasion and most of the rest is insolvency.

  14. This is the source document the Guardian links to:

    https://fullfact.org/economy/tax-gap/

    Isn’t a lot of this guess work? How does one arrive at “failing to take reasonable care in recording transactions etc”? If HMRC spot the failings, such failings would be corrected (and tax collected). Hence, this presumably means (with apologies to Donald Rumsfeld) “those failing to take reasonable care, but that we don’t know about..”?

  15. From HMRC’s Tax Gap report for 2015/16, they claim a total gap of £34bn, of which:

    – £9.4bn is innocent mistakes;
    – £8.7bn is evasion*;
    – £6bn is “legal interpretation”**;
    – £5.1bn is criminal attacks (e.g. VAT missing trader fraud);
    – £3.1bn is just unpaid and written off (mostly bankrupts);
    – £1.7bn is avoidance.

    * evasion is people either hiding part of a known income (a plumber doing some cash in hand jobs), or hiding an entire source of income (e.g. an employed plumber, taxed through PAYE, doing undeclared self-employed work on the side) or someone who is entirely unknown to HMRC.

    ** legal interpretation – HMRC’s view of the law is wrong, but they’re sticking to it.

  16. Ritchie is posting a lot less about the Tax Gap now. I wonder if this is due to a lack of funding from the PCS trade union?

  17. RichardT

    “Innocent mistakes”

    Do we know if these are: a) corrected (and hence therefore are later then collected), or b) some intelligent assessment of net errors that HMRC don’t pick up on (but might if they did more checking)?

    If a), then obviously it shouldn’t be there. If b), then it would be interesting to see the detailed calculations! On the face of it, “innocent” mistakes might have no more rational justification for being a net plus than a net minus…

    Ditto “evasion”.

    Is this evasion that is caught or not. If yes, then it’s collected (and remove it from the list). If not, then it would be interesting again to see the calcs for their estimates.

    And why is there not a figure in there somewhere for the counter amounts, the various parts where people don’t always claim everything they *legally* could?

  18. “They should ask the scott trust”: it’s the Scott Trust Ltd nowadays. The Scott Trust vanished as part of a tax dodge.

  19. ”it is an insult to diligent taxpayers that multinational firms and high-net-worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill”

    Ah, the envy of a penis.

    If Ritchie was serious about making a dent in the tax gap, he’d be campaigning about reducing evasion of VAT (37%) and the evasion of personal income taxes, capital gains and NI (40%). A whopping 10% of the tax gap is estimated to be a result of evasion of corporate taxes, and only half of that is attributable to large corporations.

    But what fun is there in harassing individuals and small businesses when you can get your virtue signalling jollies ragging on Starbucks and Apple for following the law?

  20. HMRC carry out a number of random audits every year and presumably pick up a number of innocent errors so it’s not difficult to estimate the total across the economy.

    Similarly they investigate a number of avoidance plans and take some to court. Again based on their success rate they can make an intelligent guess on the total losses.

    The cost of these audits, investigations prosecutions gives them a good measure of their diminishing returns.

  21. BiND, you completely ignore their bias. Sure, they could measure and extrapolate, but they won’t.

  22. It is interesting to work out whether HMRC should show a lower tax gap, to rid themselves of Guardianista bullshit, or a higher gap to show that more staff are needed. The fact is that it is all guesswork and as long as it is “only” a few billion then they are doing the job

  23. “an estimated £5.2bn came from evading tax illegally….it is an insult to diligent taxpayers that multinational firms and high-net-worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill.”

    What a cunt, running those two separate issues back to back in his article.

    Where’s the evidence that HNWIs or MNCs are evading tax?

  24. @Theo

    I spotted that and wondered how much fun it could afford us here to see this particular biter bit.

    Guido writes: Let’s see if the [Bar Standards] Board share the view of his fellow silks that Jolyon is “the biggest c*** at the English bar”…

    Wouldn’t it be wonderful if there could be a ‘Joshing Jolyon’ category to match ‘Ragging on Ritchie’?

  25. @RichardT “(a plumber doing some cash in hand jobs)”

    Then he really isn’t doing plumbing is he?

    Paging Rocco; maybe a good story line here.

  26. It’s all under-explained, or badly explained. The missing tax gap is (supposedly) £34 billion. But only £1.7 billion comes from legal tax avoidance (which shouldn’t even be listed). And £5.2 billion comes from illegal tax evasion. That’s £6.9 billion. So what about the other £27.1 billion? Doesn’t The Guardian have editors?

  27. I went to the fullfact.org link in the article, and it definitely did not have the ‘full facts’. It just says that a further £6.1 billion comes from people ‘failing to take proper care in filling out their tax return’. There’s still £21 billion not mentioned.

  28. As usual, a commentator , Richard T above, is more informative than the Guardian and a left-wing web resource. He says:

    “From HMRC’s Tax Gap report for 2015/16, they claim a total gap of £34bn, of which:

    – £9.4bn is innocent mistakes
    – £8.7bn is evasion;
    – £6bn is “legal interpretation”;
    – £5.1bn is criminal attacks (e.g. VAT missing trader fraud);
    – £3.1bn is just unpaid and written off (mostly bankrupts);
    – £1.7bn is avoidance.

    The £3.1 billion for mostly bankrupts shouldn’t be there. If you’re bankrupt you don’t owe any tax, do you?

    The £1.7 billion shouldn’t be there, it’s legal.

    The £6bn for “legal interpretation” shouldn’t be there, as RichardT says.

    The £9.4 for innocent mistakes, well they happen, not worth worrying about.

    Which leaves about £12 billion, about 2-3%.

  29. HDVN

    “If you’re bankrupt you don’t owe any tax, do you?”

    Hmm well presumably you did until you went bankrupt.

    If I was trying to explain why I didn’t recover all the money owed to my business, I’d distinguish “irrecoverable because client went bankrupt” from “irrecoverable because client did a runner”, and certainly wouldn’t put it down as “oh turns out client didn’t owe anything anyway due to bankruptcy, so scratch that from the unrecovered list”. I’d probably still keep in the list money I reasonably thought I would be due but which had turned out to get bogged down in tricky legal terrain. But the more calls like that I make, the more the list becomes “how my expectations turned out to be wrong” than “how I’m getting buggered over”.

  30. “The £9.4 for innocent mistakes, well they happen, not worth worrying about.”

    And they run both ways. We managed to pay a monthly PAYE bill twice and it didn’t get picked up in our annual audit. It wasn’t until our cash in bank went out by long way and I had to go back 3 years that it was found.

  31. HDVN said:
    “If you’re bankrupt you don’t owe any tax, do you?”

    There will be the current PAYE and VAT quarterly payments, and probably the last couple as well if the business has been struggling.

    Other people here will know more than I do, but I think it’s often the Revenue chasing for those that pushes businesses over the edge into bankruptcy.

    It’s even possible to owe income tax or corporation tax despite being bankrupt. Sometimes because of the differences between accounting profits, taxable profits and cashflow. Often because when you’re going bankrupt you don’t bother to file the last couple of tax returns, so you never claim for the losses and bad debts.

  32. No idea about the bankrupt, for companies there is insolvency. Usually owing a sum to HMRC (tends to be one of the bigger creditors).

    RichardT – people go bankrupt, people cannot owe corporation tax unless HMRC get the veil of incorporation removed. Company usually is the only one to owe corporation tax. Company dissolves, debts die.

    My company went under owing about £5k VAT bill, no corporation tax and a bunch of other bills.
    HMRC didn’t force us into insolvency, directors did. As part of their duties.

    While I have my own major issues with HMRC I do have to say they try and sort out payments for those struggling. Not the best deal around, they are stuck between getting the money quick and getting money at a reasonable level of payment which may not go together as options. They do a time to pay scheme and can take bills over a period of months that cannot be afforded immediately.
    Its not HMRCs fault that doing so is also an indicator the company is in financial trouble and may close.

  33. You’re not banned there either. Just the spam trap being hyperactive. I’ve been away a couple of days,just sorting it out now.

  34. Too late on this really but it needs to be pointed out.

    Everything said on this topic assumes that HMRC NEVER EVER COLLECT TOO MUCH TAX.

    So when people scream for a crackdown on avoidance (this doesn’t mean anything),evasion (fair enough) and the law is wrong! (could be, Gordon Brown and the EU are responsible for most of it) can we have an insistence that HMRC get it RIGHT?

    HMRC will NEVER try to collect tax that isn’t due from a large organisation. But just watch them with youngsters, OAPs and other ordinary folk.

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