HMRC’s calculation of the tax gap does not include an assessment of the amount of tax lost through tax avoidance, therefore it represents only a fraction of the amount that the public might expect to be payable.
I have, of course, been saying this for years. It is, I admit, pleasing to have it noted publicly.
The challenge now for HMRC is how to respond. The PAC are, in very many ways, the representation of the people to whom they are supposed to report – that is parliament and through parliament, us. Parliament has now said their reporting of the tax gap is not fit for purpose. If they do not change it will they be in contempt of parliament?
No, this is incorrect. HMRC’s estimate of the tax gap do indeed include tax avoidance. It’s just that they include what HMRC defines as tax avoidance, not the drivel that Ritchie defines as tax avoidance. For example, Ritchie would say that Google’s Irish profits are tax avoidance. HMRC will say that they’re fully compliant with the law and so not tax avoidance.
It’s a different definition. And it’s HMRC that is working in the real world here.