Tax gap data forced out of HMRC

Budget days see tax gap data emerge after appeal against information commissioner is abandoned

Written by Accountancy Age

Accountancy Age, 14 Mar 2008

HM Revenue and Customs dramatically abandoned its attempts to keep details of the 'tax gap' secret just before the Budget.

HMRC estimates the sum lost to tax avoidance and evasion to be somewhere between £11bn and £41bn each year. Total government tax receipts for 2008 are expected to reach £575bn. The take from corporation tax alone is only £52bn.

An information tribunal was due to hear HMRC’s appeal on 6 and 7 March against an order by information commissioner Richard Thomas to disclose estimates of direct tax lost to avoidance and evasion, following a freedom of information request by Private Eye reporter Richard Brooks.

The hearing was slated for a full two day hearing with two Revenue officials lined up to appear as witnesses. The afternoon before, however, HMRC withdrew its appeal without explanation. HMRC admitted that its legal fees came to £13,000.

For several days officials then refused to hand over the details, before uploading them onto the Revenue’s website on Budget day this week, having briefed the Financial Times. The paper reported the tax gap figures, showing up to £41bn lost every year, as part of its extensive Budget coverage.

HMRC’s capitulation marks the end of a battle to suppress the information lasting nearly three years. Among the many reasons it had given for refusing to disclose the figures was that the information could benefit tax evaders by 'emboldening them to exploit areas of vulnerability', and that public knowledge of the tax gap could encourage non-compliance by indicating unfairness in the tax system. Officials had even claimed that publishing the information could unsettle the stock markets.

'If the public realised the extent to which tax evasion is a drain on the economy, it could create an atmosphere in which evasion and avoidance would be less socially acceptable'.

Richard Thomas Information Commissioner

In June last year Richard Thomas rejected HMRC’s arguments, concluding: 'If the public realised the extent to which tax evasion is a drain on the economy, it could create an atmosphere in which evasion and avoidance would be less socially acceptable'. It is understood that his legal team were confident of their prospects at the information tribunal.

An HMRC spokesman said that the department took the decision to release the figures on Budget day as it was also releasing a renewed compliance strategy on the same day.

Tax gap data will help reduce avoidance