Ritchie’s tax gap is wrong

Well, we know that of course, it’s just that we’ve another reason to know so:

Tax dodging is less rife than previously thought as HM Revenue and Customs has unexpectedly discovered that Britons typically err on the side of caution, inadvertently overpaying on their self-assessment forms.

Contrary to the expectation that taxpayers play down their incomes as much as possible – or, as in recent high-profile cases, evade taxes – a trialled new system revealed the opposite to be more commonly true. An automated system that used existing data to pre-write a taxpayer’s income found that it reduced the income declared more often than not.

Jon Thompson, chief executive of HMRC, revealed the discovery in a letter to MPs. This “had a small net negative impact on overall tax receipts due to improved accuracy of self-assessment returns”, Mr Thompson wrote. He added: “Decreases in overpayments outweighed the reductions in small ­underpayments.”

7 comments on “Ritchie’s tax gap is wrong

  1. Once again I assume that the purpose of all this hype about tax rates is to bully people – everyone from the tax officers to the juries and tax payers – into giving the government more money than it is actually entitled to.

    Who would want to fight the Tax people if they will get the Daily Mail to smear you on the front page?

    It seems to be working. Although the British are absurdly law abiding and diffident towards the government.

  2. OT: foreign nationals are facing deportation because they’ve been caught declaring different income levels on their application for a visa renewal and their s/a tax return.
    It’s just appalling that the Home Office would decide to cross reference data now.
    https://twitter.com/JolyonMaugham/status/993227330620444673

    And further OT: I had a HB claimant who declared s/e earnings of 8k. The lettings agent for his private rental in Hayes was known for insisting on minimum income of 35k and provided a scan of an accountants statement to show this.

  3. Bongo – “It’s just appalling that the Home Office would decide to cross reference data now.”

    You mean it is appalling they were not doing it 50 years ago?

  4. So the British are generally honest and err on the side of caution to avoid a potentially costly and draconian intervention from HMRC.

    Who knew…?

  5. Bongo – “It’s just appalling that the Home Office would decide to cross reference data now.”

    Amazing! Some actual joined-up government for once in the UK! Involving tax, too!

    And Joyless Moan is not disapproving of it for some inexplicable reason…

  6. ‘An automated system that used existing data to pre-write a taxpayer’s income found that it reduced the income declared more often than not.’

    “Here’s what we have on you. We don’t have anything else. If you don’t report anything else, you will get away with it because we don’t have a record of it.”

    Well g-o-o-o-o-lly!

  7. I always laugh when I hear about the tax gap, as there is one section of society that is very aggressively taxed by HMRC and I’ve always wondered how much HMRC owes them.

    Pensioners. They are always given a tax code when they retire that ensures they pay too much tax. If this goes unnoticed they pay too much tax for the rest of their lives. If they have an accountant and they submit a correct tax return, recovering the tax overpaid, HMRC immediately issue a letter telling the taxpayer that they no longer need to submit a tax return, hoping that the accountant will disappear from the scene. The catch is, of course, that if something happens in the future such that you do owe tax and HMRC find out, they collect the tax plus penalties and interest.

    The State sees you as a cash cow, not a citizen.

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