Government targets ‘tax gap’

The government has reinforced its commitment to closing the “tax gap” as new figures revealed it had shrunk on last year’s figures.

Data released by HM Revenue and Customs (HMRC) on 18 October estimated the tax gap for 2010/11 at £32 billion, or 6.7 per cent of tax due, compared to 7.1 per cent in 2009/10 and 8.2 per cent in 2004-2005, when the tax gap estimates began.  The tax gap is the amount of tax that should be collected compared with the amount that is actually brought in.

Reasons for non-collection of tax include taxpayer error, where tax cannot be collected because businesses have become insolvent, tax evasion and avoidance and the hidden economy.

Exchequer Secretary David Gauke MP said: “These tax gap figures show that the vast majority of people and businesses pay the tax they owe on time. Last year £468.9 billion was collected, including £13.9 billion brought in through HMRC’s work policing the rules.

“The government and HMRC will continue to work together to make it harder for individuals and businesses not to pay the taxes that are due. We are determined to reduce the tax gap and have made £917 million available to help HMRC tackle avoidance and evasion.”

HMRC chief executive Lin Homer added: “Our determination to support the honest majority and to crack down on evasion, avoidance and fraud have kept downward pressure on the tax gap.

“We are determined to do more and we are devoting increasing resources to pursuing those who do not pay the tax they owe, while making it easier for people and business to comply with their tax obligations.”

Link: Putting your tax affairs in order