Institutes refute concept of tax gap
08 Aug 2011, Jaimie Kaffash, AccountancyAge
http://www.accountancyage.com/aa/news/2100016/institutes-refute-concept-tax-gap
THE £42bn "tax gap" might be an illusion, accountancy institutes have said.
The figure is supposed to represent the difference between the actual tax collected and what should be collected. But institutes have said that HM Revenue & Customs' concept of a "tax gap" is not useful.
Chas Roy-Chowdhury (pictured), head of tax at the Association of Chartered Certified Accountants, told the This is Money website: "It is like trying to get hold of smoke. There is no proper idea what that is and then we are trying to close it."
David Heaton, chairman of the tax faculty at the Institute of Chartered Accountants, said: "I think the tax gap is entirely misleading. The definition of what taxpayers should pay compared with what is actually paid is not very helpful. It is less than helpful because nobody really knows what taxpayers should pay.'
Roy-Chowdhury and Heaton also watned that the tax gap includes tax avoidance, which is legal.
An HMRC spokesman said: 'The tax gap is an important strategic tool, but we also set targets for the additional revenue generated through our compliance activity.'
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Visitor comments
Tax Gap
The concept of a tax gap is sensible one for tax experts and academics to discuss. It is however extremely damaging when misapplied by so called activists and politicians who lack a basic knowledge of macroeconomics and public finance. These people egged on by journalists who should know better see a conspiracy around every corner and believe that there can be happy endings to all life's tough problems I.e. someone else can pay.
Posted by: Sam Hearn , 08 Aug 2011 | 11:46
HMRC Psychopathology
The Tax Gap is a product of this. It does indeed include (guesstimated) legal avoidance. Which means they castigate everyone because they HMRC are not collecting more tax than the law requires.
Does "Dave" add on 10% when he files his own return, so as not to be part of the Tax Gap?
Another gem not highlighted in the latest condoc on Treaty Shopping is how HMRC deliberately construct anti-avoidance rules so that these tax something notional like deemed income e.g under the Transfer of Assets Abroad rules which then falls outside a Treaty whereas the underlying actual income would not. Deemed apportioned CFC income is another such. Clever to avoid a nasty Treaty override likely to embarrass the other Contracting Party.
The main aspects of HMRC psychopathology are intellectual dishonesty and wishful thinking. If one keeps that in mind it makes their pontifications and propaganda perlucid.
Posted by: Jack Harper , 08 Aug 2011 | 16:41