A copy of an H M Revenue & Customs internal publication called 'Economic Times and Tax Avoidance Behaviours' produced it seems by the HMRC Anti-Avoidance Group arrived in my post box the other day. I have no idea who sent it, but thank them anyway. It's the January / Febrary edition, so it's pretty up to date.
It's also illuminating.
Take a simple example. The latest HMRC estimate of the tax gap says that the total lost to avoidance of NIC, Income Tax and capital gains tax is £1.4 billion. And yet para 15 of this report says that the estimated loss on self employed status issues alone might be £2 billion. Other estimates are limited, but there's £200 million on employee benefit trusts in para 28 and a note in para 39 that says, with apparent concern, that all the Big 4 are actively engaged in marketing salary sacrifice schemes. There's another reference to employee benefit trust losses in para 42, mentioning £100 million. And ample more planning arrangements about which concern is expressed but no mention of loss estimates arise.
Treasury ministers like to say I've overstated the tax gap. But reading this suggests they may well be understating it, based on HMRC internal evidence.
Maybe there's a quite reasonable explanation - but this document by the HMRC anti-avidance group suggests that the figure is much bigger than the HMRC tax gap reports acknowledge - a point I have made for some time. And that seems to me to suggest that a little more circumspection by ministers may be appropriate. There are a number of ways of viewing this issue - even in HMRC it seems, and all alternatives I've seen so far suggest the gap is bigger than HMRC are suggesting.
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I know this is one of your concerns, but at Macro level does it really matter that much?
Sucking money out of a deflating economy doesn’t help matters.
Surely the real debate needs to be to ask why on earth Capital Gains is taxed at a marginal rate of 10% when income can attract a rate of 70% or more, and why we have so much unneeded complexity in the system.
Fix that with something simple and the opportunities for fiddling disappear with the complexity.
Didn’t you find Richard that a large proportion of the tax gap was small scale stuff – cash in hand to traders to avoid income tax and VAT, matters of that nature?
…oh, and do you really think that salary sacrifice schemes are unacceptable tax planning? Reducing your salary to give you childcare vouchers or pension contributions instead. That is real plain vanilla stuff.
@Adam
It’s worrying HMRC…
And sure a large part is evasion
But I also argue there’s a much bigger element of avoidance than HMRC state too – so shall we stick to that issue?
@Neil Wilson
Sure it matters
We needn’t suck money out
Tax paid could supply services to honest taxpayers rather than be lost in illicit consumption
I know which at a macro level is more useful
And consistent with upholding law and order and democracy
@Richard Murphy
It’s not lost in illicit consumption. It’s Sterling. If it is spent then that causes another transaction sequence in the UK currency zone (keeping somebody somewhere in a job!) and the currency is taxed away via that path.
Come on, you know money doesn’t stop at its first use. It keeps going until it is saved or taxed away completely.
And if it is stocked in ‘Net financial asset savings’ then it is inert. Frankly that is worse.
“Tax paid could supply services to honest taxpayers”
Tax doesn’t pay for anything in our system. Tax paid goes in the shredder, is burnt, or more likely just eliminated from bank reserves via a reverse journal.
Tax is required to make space for public goods when the economy is running at full capacity. Do you honestly believe we’re at full capacity?
The government is not fiscally constrained in its spending because of tax cheats. If there is something for sale in Sterling the government can just buy it. The limit is real stuff and people – and we’re nowhere near that point. Five million short of work says so.
You are quite right that we need to uphold law and order and the way to do that is by simplifying and regularising the tax system and introducing a tight General Anti-avoidance Rule.
Trying to plug the leaky ship that Gordon Brown invented is a waste of public resources. We need a new ship.
How about asking why we’re needlessly issuing gilts at 3.5%?
The banks currently have £75bn in gilts. That is £3bn in ‘unemployment benefit’ for feckless banks who can’t find a better use for the money. At the very least we should force them to hold the money as reserves at 0.5% and then there is £3bn that can go elsewhere.