Revenue defends tax gap calculation

by Calum Fuller

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22 May 2012

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HM Revenue and Customs

THE TAXMAN has defended tax gap calculations it supplied to the Treasury in March after the Treasury Select Committee queried the purpose of such calculations.

HMRC's calculations show that £35bn remains uncollected, while equivalent figures from Tax Research UK place the figure at £123bn.

The taxman, though, branded external work – including that of Tax Research UK – as "misleadingly high".

There is a danger, warns HMRC, that such external figures can give rise to the impression that HMRC is ineffective in collecting tax, while also encouraging the idea that non-compliance is the norm.

The select committee invited submissions on improving tax gap submissions, but HMRC maintains its figures on the tax gap are "useful in quantifying types and causes of non-compliance by tax regime and customer group", insisting it "informs deployment of resources and an assessment of long-term trends".

Its tax gap assessment, it said, helps the department better understand and explore issues associated with non-compliance and how they may be addressed.

For its part, Tax Research UK says it derived its £25bn corporate tax avoidance figure involved by examining the accounts of multinational companies and estimated what proportion of their profit was taxable.

It added that an unpaid £28bn and evasion totalling £70bn pushed the sum up to £123bn.

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