Another mind gargler from Ritchie

Look, please, shouldn\’t an accountant actually be able to understand the qualifications that people put on statistics?

Here\’s his post:

Well, the detail shows why. I searched their report for a key word. It was offshore. It comes up once, on page 45 where they say by way of introduction:

By matching data supplied by third parties to HMRC records, it has been possible to produce an estimate of the tax gap relating to income and capital gains of individuals taxed through PAYE but who do not receive SA returns. The income covered would not have been earned from employment and therefore the associated tax liability was not recovered under the PAYE system. As these individuals did not receive SA returns, the income and gains were also not reported through this means and thus additional liability was due.

This is the way in which they estimate the total impact of the hidden economy – of which offshore is, by definition, a part.

So you then turn to table 8.8 to see how much they think they lose to offshore and there’s the number in all its glory:

Offshore bank interest – estimated tax gap – £3 million

Now the UK has just claimed it has signed a deal with Switzerland – just one, albeit significant tax haven – which they claim will recover £5 billion of tax. And then there was the £3bn they claimed they’d get in Liechtenstein. And that’s before we build in the Crown Dependencies and Cayman, the BVI and so on and on and on.

But in the tax gap report they say the total loss from offshore is £3 million a year.

Who are they kidding?

This data is so obviously wrong it takes seconds to realise the deficiencies and gross under estimates in it. But they put it out as if it’s authoritative and then dismiss criticism of it as if it is absurd they could be wrong. And yet they glaringly obviously are.

No wonder I stick by my estimate of the tax gap. And so should everyone else.

Have you spotted it yet?

Yes, well done. Ritchie is mixing and matching there with the best of them.

HMRC, in reaching it\’s £3 million number, is looking at a very specific (and small) number of taxpayers. Those who earn the bulk of their income through the PAYE system but who also have other income. And, to restrict the number even further, those who are not known to have said external income and so who never get sent the Self Assessment forms to fill in.

Ritchie is trying to compare that number, a number which relates to a very small number of people earning not much money in aggregate (because, obviously, those who have large not PAYE incomes are more likely to be picked up by the various monitoring systems, meaning that we are by definition talking about the small fry here) to all offshore, all interest earned offshore.

And after that feat of misunderstanding the basic stats he\’s discussing we should all therefore agree with his estimation of the tax gap?

2 thoughts on “Another mind gargler from Ritchie”

  1. Also the Switzerland & Liechtenstein billions, even if they actually materialise, are one-offs to settle years of back-taxes. He seems to be comparing that to an annual loss.

  2. He has actually let somebody, albeit that they still have to kiss his arse, identify his misrepresentation on his blog because he feels he can argue his way out of it.

    And ends up looking like even more of a tit on the basis he’s right because he can explain his logic !

    A binary logic that, as far as I can see, seems to consist of ‘HMRC and I can’t both be inaccurate at the same time, and as you usually criticise HMRC, I am right’

    With apologies, he’s either mad, or both.

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