The Taxpayers' Alliance have published a report this morning in which they claim:
 Over the last five financial years £27.4 billion of tax revenue has been lost by HMRC through remissions or write-offs.
 That is over £1,000 per household lost in tax over the last five years, or more than £200 per year.
 £5.9 billion was lost in 2010-11. If this money was collected, it would be possible to cut more than 1 per cent off the standard rate of VAT.
 Over the period studied, £4.4 billion has been lost in Income Tax alone. The amount of Income Tax lost in 2010-11 was 52 per cent higher than in 2006-07.
As a result they claim:
A much simpler tax system could help to avoid errors of this scale in the future, and the deficit could be reduced more quickly. The 2020 Tax Commission is exploring ways to make taxes simpler and less burdensome on families and businesses, and will be publishing its final report and recommendations in Spring 2012.
I'm discussing this on Radio 5 this morning so let's just look at the claims.
First, almost all the remissions are on tax credits. So they're not part of the tax code. That's a benefit.
And 90% of the bad debt is due by companies that have gone bust. So there's not a hope of the Revenue getting the cash. I know that because the Revenue have said so.
Which leaves not a lot left over, almost all of which is due to the fact that the Revenue haven't got the resources to track people who move, or refuse to pay relatively small suns of tax which aren't worth taking to court.
So how much of this is due to complexity in the tax code? About the square root of not a lot I'd say.
The TPA really do need to learn a little about tax, business, insolvency and debt collecting. In other words if only they knew just a little about the real world of business they so claim to adore they'd really be a lot wiser.
Although maybe that's giving them just a little too much credit.
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I was involved with a charity which became insolvent in 1999. The Inland Revenue were owed £60,000 and sundry other creditors another £60,000 (including staff redundancy).
Although we eventually entered a financial arrangement whereby all creditors were paid in full – with interest – this would not have been possible unless we had appointed an insolvency practitioner (which almost doubled our outstanding debt in the end).
At that time the Inland Revenue were anything but helpful or sympathetic – bullying would be more accurate.
Whilst you may be right that the TPA arguments for simplified taxes etc are irrelevant to efficiency of collection, I think in the past tax collectors have shown all the imagination of road-menders with steamrollers when it comes to difficult situations.
But trustees do have liability in a charity
And don’t you want HMRC to collect tax due?
If not, why not?
I would say in the case of the HMRC v other creditors the most sensible option for the Govt. would be to put the other creditors first simply because of the knock on effect that will happen if HMRC get first dibs. Think about it (you obviously haven’t) if a creditor is bumped instead of HMRC the effect on their cash-flow could be disastrous enough to bring down the company which then also becomes unable to pay its creditors (inc. HMRC).
Let me ask you on a previous point Richard would you be in favour of flat rate tax so as to avoid so many problems that the overcomplexification of the tax system (mainly by Gordon Brown) has caused?
Re creditors – the reason for a preference is that far too many companie abuse HMRC – the answer in that case is to make director’s liable when abuse is apparent
Re flat tax – one of the worst ideas in tax history – calculating tax rate due is not in any way linked to taxable income
Flat tax is simply an excuse to destro society as we know it
I prefer this version of the TPA:
http://www.taxpayersalliance.org/
The next site is obviously used by newspapers:
http://www.taxpayersalliance.org/quote
Richard,
90% is bad debt? Written off?
So much for, whatever shreds are actually left, of the tax “gap” discussions….
Georges
This has always been part of the tax gap discussion