As well as planned changes for VAT on pasties and static caravans, the government appears to be backtracking on other planned tax reforms, according its latest riposte to criticisms from MPs.
In its response to the House of Commons Treasury select committee report published in March that criticised HMRC’s “flawed” calculation of the tax gap, the government said its £35bn estimate was useful in “quantifying types and causes of non-compliance by tax regime and customer group”.
The government also rejected the committee’s suggestion to commit to a structured programme for implementing recommendations from the Office of Tax Simplification.
The government dismissed another committee proposal for a general tax disclosure facility that would be easy for all taxpayers to understand. “It is important to balance this with the need to ensure that the tax system remains fair for the honest majority who pay their taxes in full and on time, and that those who undertake to pay less than they should, do not gain an unfair advantage,” the government said.
HMRC uses the controversial tax gap figure to plan resource deployments and assess long-term trends, helping the government make strategic investment choices to tackle avoidance, evasion and criminal attacks. This methodology underpins its Spending Review target to generate additional revenues of £7bn a year by 2014–15, the government said.
HMRC accepted that tax gap measures may have “limitations”, the government said, and that the current measures were not sufficiently accurate or timely to use for setting targets and performance measurement.