On those tax debts everyone keeps talking about

We\’re all aware that there\’s a lot of muttering about tax debts. Money that should go to HMRC but doesn\’t.

And this is seen as part of the salvation of the Kingdom: if only those debts were paid then no cuts would be needed.

Unfortunately, no one ever really wakes up and thinks about why there might be tax debts in the first place:

It is thought that the £6.6m in unpaid fines relates to smaller companies and individuals fined by the FSA. Some companies fined will have been wound up before they had a chance to pay. Individuals may have declared themselves bankrupt.

Agreed, that\’s the FSA, not HMRC, but the same will be true of tax debts. Some portion of it will simply be people who have gone bust. There just isn\’t the money there to pay the tax.

And, of course, our man waving the bloody shirt of tax debt to get the crowd roaring doesn\’t bother to tell us what portion that might be: meaning that his estimates are useless. We simply don\’t know whether any of it is recoverable, a bit, most, all.

2 thoughts on “On those tax debts everyone keeps talking about”

  1. Also some of it won’t be real tax, but just HMRC flying a kite.

    Two categories here:
    1) HMRC’s interpretation of tax law, or their view of the facts, which the courts later say is wrong; and
    2) estimated assessments, which are issued by HMRC when taxpayers haven’t sent in their tax returns; HMRC still tend to over-estimate to encourage people to actually send in the returns.

    In neither case does the ‘tax debt’ represent a real tax liability.

  2. Pingback: The human cost of taxation « Peter Risdon

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