Tax, not cuts to plug public deficit

HMRC should focus less on spending cuts and more on chasing the £130bn in uncollected, evaded and avoided taxes, says the Public and Commercial Services Union. 

The union warned that the main political parties were engaged in a bidding war over who could cut the most, whilst the government was losing billions to tax cheats.

The PCS estimates that £70bn is lost through tax evasion, while £25bn is lost through avoidance. It blamed some 25,000 job cuts at HMRC and plans to close 200 offices by 2011 for the £2.7bn rise in uncollected taxes last year.

 “Job cuts in HMRC illustrate the short sightedness of crude cuts where staff chasing tax have been axed, even though they recoup £600,000 each after staff costs. It is no coincidence that as HMRC staff have been cut, the amount of uncollected tax written off as doubtful has nearly doubled”, said Mark Serwotka, general secretary of the PCS.

The percentage of uncollected tax written off as doubtful to be collected is estimated to have risen from 23% in 2006 to 40% in 2009.

While the PCS was keen to link this with staff cuts, many in the profession feel it’s a symptom of the recession.

“The amount of uncollected tax is something which is highlighted every year in HMRC’s report. Inevitably one of the key reasons it has gone up this year is that the economy has been struggling - but it does need to be pursued, just as any business needs to pursue its debtors,” commented John Whiting, tax policy director at the Chartered Institute of Taxation (CIOT).

A spokesperson for HMRC told AccountingWEB.co.uk: “HMRC does not recognise these figures and we are continuing our work which has cut revenue losses by over £8bn per year between 2003 and 2008.”

He added that ‘significant progress’ had been made in key areas such as offshore evasion and the use of tax havens to evade and avoid UK taxes, which has protected the UK from losses of around £12bn since 2004.