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Closing the Tax Gap – Why Am I Paying Everyone Else’s Tax?

14th Mar 2012
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It seems a fair bet that everybody reading this column will be contributing a significant amount of tax to the UK Exchequer. One sincerely hopes that each and every reader is doing this on a fair basis and has no fear of a knock on the door from the taxman.

Sadly, any fool that is following this path of righteousness will be subsidising vast numbers of people to the tune of £35bn according to HMRC - and anything up to £100bn - if you believe that the controversial Richard Murphy’s figure of £70bn per annum is accurate.

That is a possibly inflated estimate of the tax gap that could be collected if the United Kingdom was perfect, but it really does concentrate the mind.

The Treasury Select Committee has been none too polite about HMRC’s ineffectual efforts to collect this money that it is owed.

Evaders undoubtedly abound in the sure knowledge that the odds of their being caught out are similar to those of Engelbert Humperdinck winning the Eurovision Song contest.

Everybody can see the unfairness of a situation where honest people make massive payments to support those that fiddle the system. If we really believed that tax evaders were needy and starving, perhaps some of us would willingly make (gift aid) donations to support them. In most cases, they are merely greedy and only too happy to take advantage of what they see as an inadequate collection and monitoring system.

To date, the government's solution has been akin to a Monty Python sketch. People have been queuing to establish credentials relating to their long-term relationship with Liechtenstein in order to take advantage of an unusual amnesty. Recently, part-time tutors, e-traders, plumbers and barristers have all come under the mini-spotlight, but the tax take as promulgated by HMRC has been pathetic. The plumbers reputedly paid £4m between them, less than half the debts owed by a single Scottish football club.

Now, most of us are just waiting for the right amnesty to come along. Your correspondent would love to enter into a settlement plan for tax advisers who moonlight as theatre critics but it seems more likely that he will get an opportunity earlier under the amnesty for golfers whose handicap has inexplicably risen to 21.

It is about time that honest taxpayers issued a challenge to the government. Stop messing around with silly amnesties that yield virtually no returns. It is time for a single amnesty to end all amnesties (what we were promised first time around) over let us say a six-month period.

This might offer competitive terms to anybody willing to enter into it. Perhaps a limit of four years on back taxes collected and a maximum penalty of no more than 20%.

It should also be supported by an active follow-up campaign whereby Revenue auditors do their damnedest to chase down miscreants with the ability to collect up to 20 years of back taxes and charge penalties of at least 100%.

If people actually believed that they could face massively increased liabilities unless they came clean within a short period, this would almost certainly be enough of an incentive to get them disclosing those “forgotten” bank accounts and income streams in droves.

We know that the Americans would - and do - operate on this basis and that Britain loves nothing more than copying America. This time, it would actually make sense to do so.

For the avoidance of doubt, it is emphasised that despite the flippancy, your correspondent pays all taxes on a timely basis and even proudly declares his income from theatre criticism, though it would be very nice if one year this actually exceeded expenditure.

George Osborne must already be preparing his Budget speech and it would be really satisfying if he could surprise us all by announcing a full-scale tax amnesty, at long last.

Surely nobody can doubt that such a plan that will bring in vast amounts of much needed money to a hard pressed country. It might even yield enough to pay for the Olympics.

It would be lovely to get feedback from anybody that strongly agrees or disagrees with what really should not be regarded as a radical stance.

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