HMRC has released their estimates of the tax gap:
Key findings for hand rolling
• The illicit market share for HRT was estimated to be
38 per cent in 2010-11, with associated revenue losses
of £660 million.
My word, that is a surprise, isn\’t it? Tax the crap out of something easily smuggled and which is hugely cheaper in nearby places…..and you end up with everyone smoking the smuggled stuff. Just such a surprise, eh?
Table 1.1 shows estimates for the
tax gap for 2009-10 (revised) and 2010-11 across
HMRC administered taxes. The estimates show
an increase in the tax gap of around £1 billion
from 2009-10 to 2010-11. This increase is mainly
due to increases in the VAT rate from 15 per cent
to 17.5 per cent in January 2010 and to 20 per
cent in January 2011.
Raise taxes more and people avoid/evade them more.
All just such a counter-intuitive response isn\’t it?
If you would, therefore, desire to reduce the tax gap the most obvious method is to reduce tax rates. Which is what a Courageous State would indeed do.