The following comes from this morning's Public Accounts Committee report on HMRC:
Each year HMRC publishes its estimate of the tax gap to set out the difference between the amount of tax it collects and the amount that should be collected according to its interpretation of the intention of Parliament in setting tax law (the theoretical liability). HMRC's most recent estimate of the tax gap, for 2011-12, is £35 billion, a £1 billion increase on 2010-11, although the tax gap as a proportion of the theoretical tax liability decreased slightly from 7.1% to 7.0%.
HMRC's calculation of the tax gap does not include an assessment of the amount of tax lost through tax avoidance, therefore it represents only a fraction of the amount that the public might expect to be payable.
I have, of course, been saying this for years. It is, I admit, pleasing to have it noted publicly.
The challenge now for HMRC is how to respond. The PAC are, in very many ways, the representation of the people to whom they are supposed to report - that is parliament and through parliament, us. Parliament has now said their reporting of the tax gap is not fit for purpose. If they do not change it will they be in contempt of parliament?
I can't see this one going away.
I certainly intend to make sure it does not.
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By convention Departments are accountable to the Crown which, for all practical purposes, is taken to be accountable to Ministers. Ministers are accountable to Parliament. The PAC seems to believe the opposite.
If the PAC believe the HMRC tax gap measures only a fraction of the amount lost would this not carry more credibility if they put some numbers to it? The Report is silent on that.
The clear implication is that they are ore inclined to believe my numbers than HMRC’s
HMRC is a non-ministerial department and as such is directly accountable to Parliament.
David Gauke MP.
“Exchequer Secretary to the Treasury”
“Responsibilities include:
– departmental minister for HM Revenue & Customs and the Valuation Office Agency”
https://www.gov.uk/government/ministers/exchequer-secretary-to-the-treasury
But he has no direct control
Mary was 100% right
“HMRC get the tax gap wrong. The PAC could not be much clearer than that.”
Er no, sorry. The PAC says it doesn’t like HMRC’s definition because it doesn’t include avoidance. It doesn’t say it gets its calcuation wrong. And nowhere does it use your finger in the air measurements.
The committee said HMRC measure “the tip of the iceberg”
You have to be wilfully blind to come up with your interpretation
You will also note Hodge asked HMRC why they were not using my services
But feel free to ignore that
Oh, but why let what the PAC actually said get in the way of a good bit of trolling?
This is a clear endorsement of Richard’s work. Anyone saying otherwise is in denial.
Trolls never give up
Their blindness does, however, thankfully lead them nowhere
Isn’t what is being said is that the definition of the tax gap which is used by the HMRC is not what the man in the street expects?
No it’s more than that: it’s wrong
It misses out significant parts of what should be in the gap
But isn’t that exactly the point, it’s the definition you disagree with?
Isn’t the definition a policy decision, which primarily rests with Parliament?
Who publishes the tax gap?
Can you remind me what the gap should consist of?
Checking back over your posts in the last year I can’t find one in which you state how it should be calculated.
A gap must be between one figure and another. The amount collected is not controversial, so obviously you disagree with HMRC’s calculation of what should have been collected, but I can’t find your definition.
The HMRC definition of avoidance shows £4bn uncollected, which I take to be the amount deferred while a bit of planning is being challenged (as once the courts have ruled one way or the other, the tax is then either collected or else not due, and either way would fall out of the gap). What is your definition of tax avoided that would extend this?
I’d be happy with a brief one-line summary – I have no wish to waste your time.
I have written t so many times on here you are wasting my time
Odd how you can find minutiae when you want
“You will also note Hodge asked HMRC why they were not using my services. But feel free to ignore that”
No I haven’t ignored it. Taken together with her demand for “show cases” (show trials anyone?) it undermines her credibility.
Why on earth would HMRC use you? It is filled to the brim with tax experts; which you do acknowledge you are not.
HMRC has many tax experts
Oddly, remarkably few understand tax in its social or economic context
But please feel free to fire away – those of wiser inclination seem to think I do have something to offer. Whilst they listen I’ll share the view
When they don’t I won’t
HMRC is not directly “accountable” to Parliament.It is the TSC, not PAC, that is responsible for scrutinising the Exchequer Departments.
If HMRC were accountable to Parliament it would make Gauke’s position constitutionally impossible.
Gauke is impossible
I apologise if I’m misremembering, but I recall that you recently said that the role of the PAC was to hold Parliament to account. On that basis it is right that people shouldn’t criticise it on the grounds that if Parliament, as a whole, thinks that the tax rules are wrong then Parliament should change them… a common criticism when politicians themselves are criticising companies who are obeying the law.
Now, however, you seem to be saying that the PAC is a proxy for Parliament and that if the PAC says that HMRC is wrong then so does Parliament. These two ideas of what the PAC represents are inconsistent.. and the logical conclusion of this post is that you think Parliament should compel HMRC to calculate a tax gap which includes amounts that, either expressly or by omission, Parliament has decided should not be paid.
Personally, I’m not comfortable with the fact that the view of a small comittee trumps the view of the house as a whole.. and I don’t think that it does. I don’t recall being given the chance to vote for who sits on the PAC.. and as irrelevant as my vote for parliament was, at least I had one. I can’t help thinking that you’d be quite appalled if the views of a comittee you disagreed with were taken to represent the view of the nation.
Further, is in not the case that a significant elemet of the difference between your tax gap number and the HMRC number is made up of amounts you estimate to be missing because of evasion by companies who do not file their accounts? This is nothing to do with avoidance.. it’s evasion and HMRC include all the evasion they believe is out there. Thus, if they don’t include the amounts that you include then it’s clear that they just don’t believe it exists. It’s a difference of opinion about the facts, not a difference in their methodology
If you don’t understand that the tax gap covers both evasion and avoidance – as Margaret Horge clearly does – as does HMRC – then the rest is not worth dealing with
And candidly the rest is twaddle – if a committee of the House cannot represent the House then most of the structure of the House is discredited since the vast majority of its work is done by committee
As such your comment so far misses the point it is irrelevant
But neither you nor Hodge seems willing to define avoidance. How could HMRC possibly estimate the level of avoidance if no-one will tell them what the parameters are?
http://www.taxresearch.org.uk/Documents/TaxLanguage.pdf
HMRC may agree with that definition
They do not apply it
I know exactly what the tax gap covers – both your calculation and HMRC’s. The point is that even if HMRC adopted your approach to avoidance the bulk of the difference between their figure and yours would still exist – because that difference is nothing to do with avoidance.
If the PAC represents the house then why doesn’t it pass legislation to enforce it’s view of tax fairness? Or, at the very least, to compel HMRC to adopt a different methodology? What’s stopping it?
But we’re not just talking avoidance
Why are you??????
Thank you for that.
HMRC’s definition is rather different from yours – they talk about the intention of Parliament rather than the spirit of the law – but even leaving that aside, your definition there speaks entirely of the law as it currently exists. The difference between the law as it is and the law as it might be in the future, which is what the PAC is talking about, is nowhere in there.
I note that things like Starbucks, Amazon and Google seem to fall much more readily into your definition of acceptable planning than into your definition of avoidance.
You must be on something
Please do not waste my time again
“Why are you??????”
Richard, the statement from the PAC which you reproduce refers only to avoidance – and quite explicitly states that this is the reason they disagree with the HMRC tax gap.
“HMRC’s calculation of the tax gap does not include an assessment of the amount of tax lost through tax avoidance, therefore it represents only a fraction of the amount that the public might expect to be payable.”
I know that you disagree with HMRC on their evasion calculations too – just that there’s no evidence that the PAC shares that view.
Does the definition of “tax avoidance” that you give in the note you linked to anywhere refer to what the law might be if it were changed? If so I missed it.
I have quite a lot of sympathy with the definition in your note – the “spirit of the law” is probably a better concept to use then “Parliament’s intention” – but the way you are using “avoidance” in reference to the PAC’s report seems to be very different from the definition in the note.
Calling the amount uncollected “tax lost” might make sense, referring to tax that would have been collected had Parliament made better law, but it seems fundamentally unfair to put the blame for poor legislation on the companies it applies to rather than the legislators.
As ever your comment is absurd
If you are right why the G8, G20, OECD, BEPS, and other processes?
Why too statements from Cameron and Osborne?
The reality is all acknowledge this is abuse by companies
The case is unambiguous
And has been accepted
The tax justice movement has won it
“why the G8, G20, OECD, BEPS, and other processes?”
Because people have now realised that aspects of the system could work better, or be replaced. That doesn’t mean that people using the system now are avoiding tax or being abusive, it just means that things might change in the future.
I used to drive at 60mph down the road to the nearest major town. That road is now a 40 limit. That does not mean that I was speeding, or driviing dangerously, when it was a 60 limit, it just means that someone has decided that a 40 limit would be more appropriate. So they changed the signs, and I have changed my speed. If I were to drive at 60 now I would be in the wrong: then I was not.
Very politely….no, I just won’t bother
You know that is a crass comment
And if you don’t ….
Maybe we’re discussing avoidance because the PAC reported that HMRC did not include any assessment of it in their calculation. As a result HMRC only measured a fraction of the tax payable. They did not mention other factors like evasion or failure to collect.
Did you not notice the discussion of switzerland?
Is that avoidance?
“[avoidance] therefore involves the exploitation of loopholes and
gaps in tax and other legislation in ways not anticipated by the law.”
So what Amazon is doing is not, by your definition tax avoidance since tax law quite clearly anticipates an organisation basing itself OUTSIDE the UK and selling INTO the UK.
Yet you continue to use figures for Amazon’s sales into the UK as part of your tax gap.
(you also ignore UK companies which sell abroad but are taxed here)
No doubt you’ll obfuscate and claim there was a hidden caveat somewhere but as far as I can see your ‘tax gap’ is largely all the tax that would be paid if you changed the law to how you’d like it to be and no-one changed their behaviour as a consequence.
You accused HMRC tax officials of having no understanding of tax in its social context. At least they understand tax in the real world.
This is not even worth answering
But if it was the answer is BEPS
Now quietly go away and stop wasting my time
Margaret Hodge has this 100% right
Don’t suppose this will make it through but…
Your (often offensive) refusal to enter into serious debates about your statements doesn’t really do you any favours.
I’m not sure why you bother with trying to fit your proposals into existing structures – why don’t you just say ‘ Google should pay £500m tax per year because I say so’ & then we’d know.
I notice you didn’t declare your PCS payments on R5L when discussing HMRC this morning – transparency works just one way apparently.
I have written more than 10,000 blogs
Written vast numbers of papers
Answered tend of thousands of comments
Received awards
Please don’t demean yourself by saying I don’t engage
As for radio 5 – I declared my interests – it was the bbc who edited it
I always seek to make clear conflicts – I do not control interviews
Switzerland is mentioned elsewhere. But the discussion was around avoidance because in the context of the quote you provided the PAC yoked together an alleged failure to include avoidance with a “fraction of the tax payable”. Switzerland is not mentioned in this context of avoidance. The PAC did not quantify any figure for avoidance in the way they did for Switzerland, nor quote any numbers from Tax Research. So we do not know what the Committee (as opposed to any member) believes is a more credible number.
Candidly this is more than a touch absurd as an argument
Read the whole interviews
Read the references to me
Read the whole context
And very politely, stop wasting my time with such pedantry
Richard, I’m not trying to be pedantic, just trying to set the whole thing in context, as you suggest.
I did that further reading but I’m not sure if it moves the discussion on. All I could see was that your name was mentioned in evidence, twice by Edward Troup in connection with his somewhat stupid article some years ago,and once in connection with policy making at “Q448 Chair: Why don’t you bring Richard Brooks and Richard Murphy in?
Jim Harra: If they wish to apply on secondment–”.
There is no mention of the Tax Justice Network.
I also found it puzzling that the PAC believes (Rec 5)”In seeking to make the UK more attractive to business, HMRC has not considered adequately the impact that changes to the tax regime will have on the behaviour of large businesses.” In terms of decision making I thought that it was people like Osborne or Brown who adopted these goals, which MPs then formally approved?
Richard, I am amazed that you continue to be so patient with the fools, pedants denialists and obscurantists!
If the EU has awoken to corporate tax base erosion, then it really does exist! They are not talking about fairies and elves.
The truth is that the elite and their puppets the Big 4 Accountants and the multi-nationals, not to mention a number of MPs (I suspect) have complete contempt for democracy. They would much prefer states to be run in the same autocratic and borderline sociopathic way that they run their own businesses.
Tax base erosion is but one prong of the assault, by those that believe socialism should be restricted to the top tier of the wealth pyramid.
Another is the Trans Pacific Partnership agreement, which is absolute abomination and has been introduced to stifle free trade.
The vast majority of us will be left to endure the so called “free market” which is a misnomer if there ever was one!
The attack by the elite is on all fronts. It is a concerted effort to destroy the sovereignty of states and any form of welfare provide to their citizens. The aim is to roll back the Enlightenment and to reintroduce Feudalism.