Why Ritchie is wrong on the tax gap

An extremely interesting line from HMRC.

The trend in the VAT gap is used by OBR as part of the VAT receipts forecasting process.

This is something that Ritchie just never considers.

That tax rates are set with the certain knowledge that any tax system has holes and gaps in it. Revenues assumed from mooted tax changes are calculated with this knowledge in mind.

In fact, this means that there is no tax gap at all, not the way Ritchie defines it.

Recall, if you will, what he says that gap is. It\’s the gap between what Parliament thinks everyone should be paying and what they do pay.

However, HMRC, thus Ministers and thus Parliament do consider those inevitable holes when setting the tax rates and calculating the revenues to be raised. Parliament gets the revenue that Parliament expects therefore: and thus there is no tax gap at all.

It may well be that Joe has pocketed the £20 he got for cleaning windows and has no intention whatsoever of paying VAT or income tax on it. But the existience of this sort of behaviour is already included in the likely revenue calculations.

Thus, as I say, there is no tax gap at all.

12 thoughts on “Why Ritchie is wrong on the tax gap”

  1. He’s desperately trying to justify his figures on his blog – most of which seems to be ‘I’m right so HMRC must be wrong’

  2. Well, the short answer is “because he’s Ritchie”, isn’t it?

    He is the sort of political spokes-weasel who, if they said “the sun came up this morning”, would get me going outside to check carefully.

  3. Murphy says the tax gap is £123bn, the Treasury says it is £35bn. And you, Tim, say that proves it’s zero. Uncomfortable as it may be, I find myself agreeing with the Treasury.

  4. I hope Paul B does not have a heart attack as a result of my agreeing with him.
    I have minimal expectation that a selfish individual like Murphy will publish my post to his site that says the tax gap for anyone who cannot read Hebrew should be 10%.
    Tithing should be fun – a massive party, far bigger and better than Harvest Festival (because my younger son is autistic we aren’t currently doing parties so I donate to charities instead but we *will* get back to it).

  5. Vote United Kingdom Independence Party, you tossers.

    I’ve sold my Mum and her intangible assets, can I have a badge please?

    I know I’m way off topic (OT you bloggers cream for it), but did any of you see the disaster that was UKIP’s attempt at persuading sane people to notice them? It’s a regret of mine to know that you weren’t involved in that shit, Worstall.

    You twat.

  6. Oh, hang on you were! Those dicks sounded just like you! Fuck the link. Be embarrassed.

    And continue being wrong. 90% wrong, with a graph to prove it. Or maybe some demented twat to quote, or then a quadrant of arseholes who’ve got some money, then pure fucking faith in the fairies.

    Old boy.

    It really doesn’t matter what thread I post on. The Guernsey Boss will shake me by the curlies.

    I’ll have a bit of what timmy takes to get through the day?


  7. I hear that Arnald nominated himself for Rear of the Year. Apparently every time he walks away from a conversation he hears someone muttering “What an arse.”

  8. And except in RitchieWorld when Joe pockets the £20 (or banks offshore the £20 million), he may not have paid taxes on it, but he and other people will when he spends or invests it in the open economy.

    Odd ain’t it, that some of the most enthusiastic advocates of a multiplier/circulation effect for government spending, don’t believe it exists for private spending. They’re the same ones that want to drive the non-dom rich out of London, under the peculiar impression that they rich residents are taking wealth away rather than bringing it in and dispersing it.

    Money, they seem to think, disappears when it is unsupervised by the state. It is not just that only state spending is good, and wicked people can’t be trusted with their own money. Nothing can exist beyond the management of a public body. Only state spending exists at all.

    If this *is* their mindset, it explains the terror of “secrecy jurisdictions”. If value is beyond control then it feels to them it has been destroyed.

  9. This morning he has some title that the HMRC is wrong, blah blah blah.

    Next to it is an ad for the Courageous State.

    Has anyone else noticed this irony?

  10. @ Paul B
    One-third of 10% – two years out of three they had a big party, the third year they gave the tithe to the landless Levites, widows orphans and refugees.

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