Institutes refute concept of 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.’

Related reading

Life Belt with Computer Folders