Who cares about the Tax Gap?

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FT.com / UK / Economy & Trade - Tax system flaws cost UK £40bn a year .

Again, reasoned analysis from the FT this morning, this time on HMRC's new report on the Tax Gap. The FT says:

Loopholes, evasion and other flaws in the tax system are costing the country about £40bn in revenue a year, according to an official estimate likely to inflame arguments over how to repair Britain’s biggest ever peacetime deficit.

HM Revenue & Customs’ first ever estimate of the overall “tax gap” reveals that 8 per cent of the expected tax due goes uncollected for a variety of reasons ranging from simple errors to criminal attacks.

The reactions are interesting:

Advisers expressed scepticism about the tax gap calculations, however. Francesca Lagerberg of Grant Thornton, a professional services firm, said the Revenue risked chasing after “mythical amounts”. Bill Dodwell of Deloitte, another professional services firm, said: “It really is finger in the air stuff.”

Mythical? Respectfully, these are responses of those in denial about the reality of the scale of tax loss in the UK, loss that their firms help create through tax avoidance - which Deloittes denies forms part of the tax gap, suggesting it is officially endorsed.

Thankfully alternative comment is available:

But Richard Murphy, a campaigner and TUC adviser, accused the Revenue of seriously underestimating the scale of the tax gap, which he believed was likely to total about £100bn. “People should be angry about it,” he said.

The TUC recently called for a fairer tax system that “made it harder for people to avoid or evade paying the proper amount of tax”, which it said was an alternative to making big cuts in services or making ordinary people pay more tax.

Quite so.

It's a good job some of us care about the tax gap.