Press Release: More than three times as much lost to fraud as to avoidance

The Association of Taxation Technicians (ATT) has voiced concern over new government figures, which show that as much as three times more tax revenue is lost as a result of illegal activity than through tax avoidance.

The Association of Taxation Technicians (ATT) has voiced concern over new government figures, which show that as much as three times more tax revenue is lost as a result of illegal activity than through tax avoidance.

The figures come from the Government’s annual estimate of the ‘tax gap’. This is the difference between tax collected and that which, in HMRC’s view, should be collected. The Government estimate the gap at around £35bn a year in 2011-12, creating an estimated shortfall of 7% of total tax liabilities. This total includes an estimated £4bn lost to tax avoidance. However, £4.7bn was lost to criminal attacks, £5.1bn to evasion and £5.4bn to the ‘hidden economy’, a total of £15.2bn from illegal activity. 

ATT President Yvette Nunn commented:

“Tax avoidance is a fashionable topic and stories about certain multinational companies are inevitably and eagerly lapped up. Whilst we do not seek to diminish the importance of public attention on avoidance, these figures demonstrate that no less scrutiny should be applied to the illegal activity that is costing the Revenue vast sums of taxpayers’ money. Disproportionate coverage is skewing the views of the public and they have a right to be informed of the causes of revenue loss: avoidance and evasion. HMRC should be credited for having made an increasingly concerted effort to tackle evasion in recent years and these figures demonstrate why.

“These figures also show how much is lost to the Exchequer through errors and carelessness by taxpayers - more than £7 billion a year. This is an area where HMRC is still not doing enough. We would like to see a stronger focus on education and simply making it easier for people to complete their tax returns. Wider simplification of the tax system would also help reduce errors as well as making avoidance more difficult.

“It is also worth noting that, although £35 billion is a large amount, and the Government are right to put additional resources into tax compliance, this figure compares well to international jurisdictions. The most recent estimate of the tax gap in the United States, for example, puts the tax gap there at 14 per cent of total tax liabilities, double the percentage share in the UK.

“A lot of what gets called avoidance in the press is actually not avoidance by the Government’s definition. It is simply companies taking advantage of reliefs or otherwise managing their tax affairs in a tax efficient manner. The existing rules for determining tax liabilities for companies that trade in several countries undoubtedly need to be updated in this area and I welcome the fact that the OECD has been asked to consult and come up with recommendations.

“For those who have been evading tax, the ATT urges them to come clean. Voluntary disclosure usually leads to lower penalties, a reduced chance of prosecution and a reduced risk of being ‘named’ under the publication of details of deliberate defaulters scheme.”

Notes for editors

  1. According to HMRC, the constituent behaviours of the total tax gap are: ‘error’ (£2.9bn), ‘criminal attacks’ (£4.7bn), ‘evasion’ (£5.1bn), ‘hidden economy’ (£5.4bn), ‘avoidance’ (£4bn), ‘legal interpretation’ (£4.3), ‘non-payment’ (£4.4bn), and ‘failure to take reasonable care’ (£4.3bn).
  2. HMRC’s report, Measuring tax gaps 2013 edition: Tax gap estimates for 2011-12, can be found here.

Technical Team

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