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PAC: Fraud and error tax losses ‘worryingly high’

“WORRYINGLY HIGH” amounts of tax are being lost through fraud and error, the Public Accounts Committee has concluded in its 32nd Whole Government Accounts report.

Some £13.2bn was written off in the accounts for 2011/12 as a result of losses from fraud, error, negligence claims and debt management across government. The National Fraud Authority estimates public sector fraud to be £20.6bn and HMRC estimates that the annual tax gap has risen to £35bn.

In response, the committee has recommended the Treasury should “develop, publish and implement an action plan setting out a co-ordinated strategy to tackle fraud and error and report cross-government figures within the WGA which can be used to show the impact of the government’s counter-loss activities”.

The committee further argued a better, more comprehensive set of Whole Government Accounts is required. In particular, it recommended The Treasury should reconsider its continued exclusion of publicly-owned and controlled bodies from its report, which the PAC maintains undermines the credibility of the report and contributed to the auditor’s qualification of the accounts.

The committee, chaired by Labour MP Margaret Hodge (pictured) said: “We remain concerned about the number of public sector bodies that are still excluded from the WGA such as Network Rail and the government-owned banks. We welcome the fact that ONS is reviewing its treatment of Network Rail in the National Accounts and that it will report the outcome before next year’s WGA. But we remain firmly of the view that the Treasury should follow normal accounting rules, rather than the National Accounts’ classifications, when compiling the WGA.”

It added greater transparency is needed in relation to off-payroll arrangements with staff, particularly in health and local government. The issue is currently being investigated by the specially set-up House of Lords Personal Service Companies Select Committee. It follows controversy last year when it emerged the BBC employed 25,000 people who did not pay tax at source. The figure included about 13,000 on-air television and radio ‘talent’, with a further 12,000 off-air staff. About 3,000 were paid via private companies which could potentially have allowed them to reduce their tax liabilities.

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