Pinsent Masons, the lawyers who double as HMRC's PR agency, have issued a press release this morning (no link as yet, sorry) saying:
The amount of extra tax collected by HMRC in its new campaign against tax avoidance by the “mass affluent” has jumped by 60% in the last year says Pinsent Masons, the international law firm.
According to data provided by HMRC to Pinsent Masons, HMRC's “Affluent Unit” collected £137.2 million in additional tax from investigations in 2013/14, up from £85.7 million in 2012/13.
HMRC opened the “Affluent Unit” in 2011 in order to target a far wider high group of taxpayers whose income means they are not considered wealthy enough to be scrutinised by HMRCs High Net Worth Unit.
HMRC's Affluent Unit now investigates the tax affairs of UK residents with an annual income of over £150,000 or wealth of over £1 million which makes up around 500,000 taxpayers in the UK.
All of this sounds like good news until you look at some basic facts.
First, HMRC say the tax gap is £34 billion of which £14.2 billion relates to income tax, national insurance and CGT paid by individuals.
Then take into account the fact that HMRC think that the top decile of taxpayers pay 55% of all income taxes, and that the top 1% (a smaller group at a little over 300,000 people than those being considered here) pay 27.4% of all tax.
The remember that total income tax liabilities in 2014/15 should be £167 billion (and were only a little less in earlier years).
And then appreciate that this then implies that the group being sampled here may pay, even having eliminated the ultra wealthy, one quarter of all income taxes or maybe £40 billion or so a year.
And HMRC collect from them just £137.2 million, or at most 0.34% of the tax that they owe, as a result of investigations.
But, as a whole HMRC claims that its compliance activity recovers £23.9 billion a year compared to £579.1 billion of tax paid in 2013/14.
So the average rate of HMRC recovery is supposedly (although I have doubts about this, but I am using consistent HMRC data here to avoid arguments on that issue) 4.13% of taxes as a whole as a result of compliance activity and yet just 0.34% is collected from the affluent.
There are three possible interpretations to this.
The first is that HMRC just make large parts of this data up to suit whatever PR purpose they have in mind. There are, I am afraid good reasons for thinking that to be true.
The second is that HMRC is really very bad indeed at investigating the affairs of the affluent even though it is well known that this is a group particularly prone to tax avoidance and who have been targeted for this reason on a number of occasions.
The third, and most likely, is that HMRC know there is a problem here and just do not have the resources to deal with it.
Whichever option is true what this data proves is that HMRC's performance in tackling tax abuse by the wealthy is woeful, and that needs to change if any government is to be successful in closing the deficit.
And what this data also proves is that someone needs to ask why HMRC are less than 10% as efficient at collecting tax from the wealthy than they claim to be in general.
Perhaps if HMRC bragged less through their favourite firm of lawyers and did a little more it might help. As it is, the one thing they seem to be good at s getting PR for statistics that do not stand up to scrutiny.
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We’ve been here before: the ‘folk history’ of the 1970’s and the IMF bailout is ‘squandermania’, an excess of spending and borrowing; the bit that we don’t talk about, because that would be impolite around the dinner tables of Islington, is a collapse in tax compliance among large companies and wealthy individuals.
the early 1970s saw the Credit creation and competition law passed which led to a massive increase in credit. The inflation and industrial unrest is usually blamed on the unions and Labour for having to get help from the IMF for the trade balance. I suspect it was more to do with the emergence of less regulated banking following the end of Bretton Woods, plus the oil price rise. This became the time of ‘stagflation’ which became the justification for the Reagan -Thatcher economics but we can’t let this spoil a good story about socialist incompetence.
“Compliance activity” covers a wide range of activities designed to ensure that tax is paid. As you’ve mentioned before, it covers things like changing the rules to prevent avoidance, and so on.
“Investigations” is one of those activities.
I’m not entirely surprised that the part is less than the whole, to be honest. You’re comparing apples and apple trees.
As I made clear, it’s not me doing that: it’s HMRC who need to be clear what they are talking about
Their messaging is wholly inconsistent and I have a right to highlight that fact
Their message seems consistent to me: “We are collecting a lot from people who don’t want to pay it to us”.
Whether they’re doing as well as they ought to be is a good question, of course, as is whether the figures they use (like the “compliance activity” one) are reasonable; but those are not components of their message.
If you’re satisfied with that you have a remarkably low level of expectation
Or you are seeking to divert attention from my argument
I wonder, is that deliberate?
First: I haven’t said I’m satisfied with their message; second: if I were seeking to divert attention away from your argument, then commenting on it would seem to be an odd way to do so!
I simply think the evidence you cite doesn’t support your contention.
I do think HMRC is under-resourced, and giving them more (and more senior) staff would be an excellent thing to do; but as support for that stance, the number-crunching you’ve done is flawed.
We have to differ then
I think my number crunching is just fine
I think HMRC’s data is the problem
And I did say so
You’ve managed to confuse yourself with statistics again richard.
The £137m has been collected by a specialist unit looking at the very wealthy.
The £23.9bn is a figure across the wide spectrum of HMRC activites and clearly will include much extra tax from the very wealthy…after all the £23.9bn includes tax saved by the closing of ‘loopholes’ which you yourself have pointed out are mainly the preserve of the very wealthy.
It is therefore nonsense to say HMRC are less succesful at collecting extra tax from the very wealthy than the rest of us.
You say HMRC’s message is inconsistent and unclear but I find it pretty obvious what they have said.
The message is indeed clear, and is exactly what I have written, using their own stats
I did not use anything else
This is good news as it is the “wealthiest” that start up companies this producing jobs and tax revenue. So what if HMRC are leaving these wealth creators to expand and grow the economy. More effort should be placed on targeting the leeches of society who want everything for free via their benefits and hand outs. That’s how to balance the books.
I leave others to comment
I presume you know how morally repugnant your comment is?
Fair Point! The government gives more benefits to large wealthy, tax dodging companies than it does in benefites for people out of work though so they’d be the first to be losing their benefits in my ideal world. These companies and extreamly wealthy people tend to pay terrable wages so their workers are also in need of benefits in order to survive. If companies paid better wages to their employees, they would reduce their prifits thus reducing their tax bill, the knock on effect would be far more positive to the economy as workers would be earning enough to survive without benefits and would pay more tax into the bargain. Also those so called leeches would be more inclined to go to work as the pay would be worth getting out of bed.
Please excuse my spelling, I’m rather hungry and that comment really wound me up.
And what about all the company directors who leech off the state with their generous tax allowances for company cars,use of homes as “offices”, dividends paid to offshore spouses etc ? The tax gap is around £30bn ( Richard may confirm if this is correct) the amount of benefit fraud etc is minimal in comparison
The tax gap is in my estimate £119.4 billion