I can help Ritchie here

Slightly technical but I can indeed help R. Murphy here.

He\’s made \”calculations\” of what the tax gap is.

HMRC, the naughty little boys, disagree with Richard as to the size of that tax gap.

He\’s got a nice little chart here.

Now, look at that chart. The boxes and so on.

OK, so HMRC count as part of the tax gap the second and third of the top four boxes.

General non-compliance and avoidance.

Richard (although he doesn\’t say so here) counts as the tax gap the second, third and fourth of the top four boxes.

Oh yes he does!

In the Missing Billions he looks at the headline tax rate and the actual tax rate. The difference between the two is the tax gap.

He makes no allowance at all for people making use of tax allowances exactly as Parliament intended.

Well, one allowance:

As a proportion this may be the highest gap of all. Much may be due to legitimate tax
planning, but by no means all is. Some, undoubtedly, is due to tax avoidance.

That is, in one sentence, he manages to point out that his entire calculations are wrong. The difference between the headline rate and the effective rate is not in fact a good guide to tax avoidance. It\’s a measure of the just and righteous use of allowances plus avoidance. Indeed, he implies himself that the majority of it is just and righteous (\”much\”).

And then, every time he returns, like a dog to its own vomit, he ignores his own observation. That he has not measured tax avoidance at all.

So, this is why his figures differ from those of HMRC. They are trying to measure tax avoidance. Richard is not trying to measure tax avoidance. Richard is trying to measure tax avoidance plus the just and righteous use of tax allowances: tax compliance in fact.

Well, if you ask different questions you\’re likely to get different answers, aren\’t you?

3 thoughts on “I can help Ritchie here”

  1. Pingback: FCAblog » Ritchie and the overegged tax gap

  2. Pingback: FCAblog » The £120bn tax gap and the Fair Tax Mark cannot co-exist

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