Ritchie now accepts that his tax gap estimates are crap

The following press release from the Public Accounts Committee seems to be worth sharing in full because it reflects a great deal of what I have said about HMRC’s weaknesses for a long time. Action is desperately needed. I note what is said on the tax gap.

Excellent, so he’s noted the following:

Tax fraud results in losses of some £16 billion a year, almost half of the £34 billion tax gap – that is, the difference between the amount of tax HMRC collects and how much it should, in theory, collect.

That is, that his estimates of £120 billion are crap.

7 thoughts on “Ritchie now accepts that his tax gap estimates are crap”

  1. Any thoughts about where the other £18 billion has got to ? Is it just the difference between theory and reality, friction in the tax collection machinery or something else ? Thanks.

  2. @ JonD
    i) The VAT threshold of £82,000 – that is any small business with revenue below £82k doesn’t have to charge VAT (collect it for the revenue).
    ii) Imports from the EU by travellers and the exemption from customs of goods brought back into the country below the duty-free limit
    iii) clever and legal tax avoidance schemes

  3. I happened to catch an interview with RM on some radio program over the weekend (can’t remember what exactly, it would have been between 4 and 7 on Saturday or 2 and 5 on Tuesday, thats when I was in the car). And apart from wanting to rip the radio out of the dashboard due to the rampant wrongness of the entire thrust of the piece, I was surprised to hear RM admit that tax evasion via foreign tax havens is far outweighed by tax evasion in the domestic black economy. I wasn’t expecting him to admit that. Did anyone else hear that, and if so what program was it?

  4. Bloke in North Dorset

    JonD,

    You can add bankrupt companies and individuals, small fraud cases that are too costly to chase and the grey and black economies, from what I have read.

  5. @ BiND
    “small fraud cases that are too costly to chase and the grey and black economies,” are part of the £16bn tax fraud. Anyone on benefits who doesn’t declare the occasional £5 (which would lose him/her £4 in benefits/tax and cost £10 to process) is committing tax fraud as an accidental side-effect.
    I omitted to mention bankruptcies because I thought they were less significant than the other categories.

  6. The Laughing Cavalier

    VAT Carousel Fraud is still far greater than governments care to admit and it has been a major problem since Brown failed to get it under control.

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