THE DISPUTE HM Revenue & Customs faced after their previous tax gap estimate – as it was inacurate and misleading – was particularly heated and led to criticism which dogged the department for weeks afterward.
So with the release of the latest figures, the emphasis has clearly been on accuracy.
Of course, as some have observed, a neat balance has to be struck – overstate the scale of the problem, and you appear incompetent, but understating it could mean extra resources for the job are not forthcoming.
What the report shows is that the value of the tax gap has remained consistent, between £31bn and £35bn, since 2004, falling as an overall proportion of tax take.
It’s a positive trend for the taxman, certainly, and it’s been able to claim some wins after what has undoubtedly been a turbulent 12 months, especially in respect of avoidance and evasion issues, to which it attributes £5bn and £4bn of the gap, respectively.
Chief among those in this report is – in spite of recent headlines – that the big taxpayers are by and large paying up, and not just in corporation tax, but in national insurance, VAT and PAYE as well.
The damage the taxman could face for failing to deal with the corporate tax hot potato could be severe, so HMRC might well be quietly satisfied on this front.
It adds, too, that it has offered extra support to large employers with guarded language about real-time information reporting.
SMEs, though, come out of this rather badly, identified as the worst offenders for engaging in avoidance and evasion. It is there that HMRC threatens to allocate more resources for enquiries – a difficult task, PR-wise, in a world in which ‘big business’ is bad and ‘the public and little shops’ are good.
The myriad taskforces we have seen deployed this year are likely to form part of that arsenal, and could well be utilised more frequently. Amnesties and legal challenges will likely be part of the offensive, too.
It also recognises most people pay their dues, but points out the campaign that has been waged against avoidance and evasion.
That campaign could prove significant not only now, but in the coming years, as it could have a profound effect on the size of the tax gap as several large schemes are challenged and shut down in the courts.
That would represent a substantial step in the right direction, but if the tax gap is to be effectively managed in the future, further areas of leakage must be tackled with the same fervour with which avoidance and evasion have been treated.
Legislation must be better written and then enforced, battles – particularly court cases and tribunals – must be more wisely chosen, and errors must be less easily made. Then we might see an impact on the value of the tax gap, as well as its proportion.
Does Darwin's theory apply to taxation? Colin ponders...
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