Freelance tax writer
Share this content
AIA

HMRC dismisses PCS tax gap estimate

by
23rd Sep 2014
Freelance tax writer
Share this content

A new estimate of the UK’s tax gap is “flawed and muddled”, according to HMRC. Tax campaigner Richard Murphy’s report for the Public and Commercial Services Union (PCS) estimates the tax gap for 2013/14 at £119.4bn.

The PCS will launch the report later today at a fringe meeting at the Labour Party conference in Manchester. It claims that reductions in estimates of tax avoidance and tax debt have been offset by a significant increase in the estimated tax loss from evasion.

The report shows that tax evasion “now costs our economy more than £80bn a year”, the PCS said. It calls on the government to “tighten up legislation and reverse the counterproductive cuts in HMRC staffing”.

An HMRC spokesperson told AccountingWEB: “The PCS tax gap estimate is over-inflated, flawed and muddled. The IMF has endorsed HMRC's estimate of the gap at £35bn, which is in line with the Code of Practice for Official Statistics. Since 2011, we have brought in £60bn from tackling tax dodging alone.

“Ninety per cent of all tax liabilities are paid and the vast majority of UK taxpayers, both large and small, pay their dues. HMRC's ability to collect what's due is improving, which even the PCS recognises. We are not complacent and will continue to exert maximum downward pressure on the tax gap.”

Update at 16.45: The full report, which runs to more than 80 pages, is now available.

Replies (19)

Please login or register to join the discussion.

Stepurhan
By stepurhan
23rd Sep 2014 09:08

Report available?

Presumably not until after the meeting today, but will this report be publicly available? I'm especially interested in how they come up with their figure for tax evasion. By its very nature, that is something that you cannot really collect statistics on.

Thanks (1)
avatar
By johnjenkins
23rd Sep 2014 09:27

Pot

calling kettle springs to mind.

I have never believed any figures that are bandied about to make a point. If Tesco can't get it right and HMRC can't get it right what chance Twoeds have?

Thanks (0)
Replying to Matrix:
avatar
By BananaMan
23rd Sep 2014 10:05

I was thinking

johnjenkins wrote:

Pot calling kettle springs to mind.

 

I was thinking the exact same thing

Thanks (0)
Replying to Matrix:
avatar
By John MacDonald
24th Sep 2014 16:09

Tax gap

johnjenkins wrote:

calling kettle springs to mind.

I have never believed any figures that are bandied about to make a point. If Tesco can't get it right and HMRC can't get it right what chance Twoeds have?

John, could you please translate your opening sentence into plain English?
Thanks (0)
avatar
By AndyC123
23rd Sep 2014 12:11

Crazy figures

Murphy's figures include legitimate tax avoidance as part of the 'tax gap' which is crazy.  You might as well decide how much tax you'd like the UK to collect and then say everything between that amount and the actual amount is a 'tax gap' which HMRC ought to be addressing.  It's impossible that they can.

And of course, much of this gap isn't even 'disapearing' from the UK.  If a builder pockets £500 cash for a job and doesn't report it in his tax return then for sure it's tax evasion but what happens to the £100 (if he's a basic rate tax payer) that doesn't get paid in tax?  It doesn't vanish.  Chances are it's spent in the shops or down the pub. That's not to condone it this isn't a case of billions lost to the UK economy, it's just lost to HMG.

Thanks (2)
Replying to Vile Nortin Naipaan:
avatar
By BananaMan
24th Sep 2014 12:42

[Simple]

AndyC123 wrote:

And of course, much of this gap isn't even 'disapearing' from the UK.  If a builder pockets £500 cash for a job and doesn't report it in his tax return then for sure it's tax evasion but what happens to the £100 (if he's a basic rate tax payer) that doesn't get paid in tax?  It doesn't vanish.  Chances are it's spent in the shops or down the pub. That's not to condone it this isn't a case of billions lost to the UK economy, it's just lost to HMG.

 

Is this not just a [simple] case of timing differences at play?

Thanks (0)
Replying to Vile Nortin Naipaan:
avatar
By BananaMan
24th Sep 2014 12:42

.

duplicate

Thanks (0)
avatar
By johnjenkins
23rd Sep 2014 12:25

@Andy

It's not even lost to HMG They just don't get it as quick. In this country the black economy forms part of the real economy. If it didn't we would be bankrupt like some other countries.

Let's say that everybody declared everything and all tax was paid on time.Would basic rate come down? Of course not. The less the government get, the less they will waste.

Thanks (1)
avatar
By MattG
23rd Sep 2014 13:36

Nice to see a good independent balanced report.....

Report commissioned by public sector union suggests that the most important thing to do is employ more public sector employees. In other news Pope confirmed to be Catholic and bear caught defecating in woods...

Whether the conclusion in right or wrong I don't think that a 4 page report (where 1 of those in an intro page), with 7 references (3 of which are figures they dispute) is really going to win the argument, particularly when it comes from such a biased source.

It's fair enough that a Union is biased - sort of the point really, but you'd think they might try a bit harder than this.

Makes me glad I decided not to join PCS, or any union (was a pretty easy choice to be fair), I'd hate to think my subs were going towards funding this sort of "analysis". Honestly they haven't even tried to flesh it out with some wonderfully informative graphs, hope they didn't spend too much on this.

Thanks (0)
Replying to Rgab1947:
avatar
By John MacDonald
24th Sep 2014 16:02

Tax gap

MattG wrote:

Report commissioned by public sector union suggests that the most important thing to do is employ more public sector employees. In other news Pope confirmed to be Catholic and bear caught defecating in woods...

Whether the conclusion in right or wrong I don't think that a 4 page report (where 1 of those in an intro page), with 7 references (3 of which are figures they dispute) is really going to win the argument, particularly when it comes from such a biased source.

It's fair enough that a Union is biased - sort of the point really, but you'd think they might try a bit harder than this.

Makes me glad I decided not to join PCS, or any union (was a pretty easy choice to be fair), I'd hate to think my subs were going towards funding this sort of "analysis". Honestly they haven't even tried to flesh it out with some wonderfully informative graphs, hope they didn't spend too much on this.

What do you think about the full 80 page report?
Thanks (1)
avatar
By Georgia
23rd Sep 2014 20:46

Have HMRC managers acted dishonestly?

There is a fairly unambiguous claim by Mr Murphy that senior management at HMRC knowingly interfered with the preparation of its estimate  of the tax gap to cover their own backsides.

 

See here http://www.taxresearch.org.uk/Blog/2014/09/22/new-report-the-tax-gap-is-119-4-billion-and-rising/#comment-area

 

It is an allegation of dishonest conduct, that senior management has deliberately misled the public for their personal gain.

 

If this is true, it is a very serious matter that requires further investigation.

 

If it is untrue, then making unsubstantiated allegations brings Mr Murphy’s conduct into question. Is this conduct befitting a chartered accountant?

Thanks (0)
Stepurhan
By stepurhan
24th Sep 2014 10:24

Devil in the detail

Thanks for the link, but that is only the executive summary (half of which is cover pages largely consisting of their estimate in a large font). Is the full report available. The summary indicates that the report has solid grounding (based on the sources cited) but without seeing how the sources have been used, that could just be smoke and mirrors. Is the full analysis available at all?

I can't help feeling that including tax avoidance in the figure is a foot-shooting error though. To have credibility the report needs to be rigorous in its use of figures. To include a figure whose very existence is subjective, since unacceptable tax avoidance is a matter of opinion, goes against this. The writer immediately shows a bias, and the rest of the figures supporting that bias become suspect as a result.

Thanks (0)
Replying to SXGuy:
avatar
By John MacDonald
24th Sep 2014 16:01

Tax gap

stepurhan wrote:

Thanks for the link, but that is only the executive summary (half of which is cover pages largely consisting of their estimate in a large font). Is the full report available. The summary indicates that the report has solid grounding (based on the sources cited) but without seeing how the sources have been used, that could just be smoke and mirrors. Is the full analysis available at all?

I can't help feeling that including tax avoidance in the figure is a foot-shooting error though. To have credibility the report needs to be rigorous in its use of figures. To include a figure whose very existence is subjective, since unacceptable tax avoidance is a matter of opinion, goes against this. The writer immediately shows a bias, and the rest of the figures supporting that bias become suspect as a result.

What do you think about the full 80 page report?
Thanks (0)
Replying to Vile Nortin Naipaan:
Stepurhan
By stepurhan
25th Sep 2014 22:23

Need some free time

John MacDonald wrote:
What do you think about the full 80 page report?
When I have had time to read the full 80-page report, I will let you know.
Thanks (0)
By mydoghasfleas
24th Sep 2014 11:34

Tighten up legislation?

I believed you tighten up legislation where it is flawed and admits "loopholes".  That is someone is legally avoiding tax by dint of legislative shortcomings.  I cannot see how tightening up legislation to reduce evasion is going to work; the first step of evasion is decision to break the law.  It brings us straight back to the Parliamentary fodder and lazy hacks combining evasion and avoidance because they are too damn idle to do anything except be spoonfed by interested groups.

Thanks (1)
avatar
By vstrad
24th Sep 2014 13:50

Murphy's Law

I used to engage with Richard Murphy on various blogs but do not waste my time doing so any more. Murphy is a zealot with an agenda. If he has any private clients, which I doubt, their tax bills will be enormous.

Thanks (2)
avatar
By johnjenkins
25th Sep 2014 09:35

@John MacDonald

I was trying to make many points in a short space. pot calling kettle black referring to HMRC having to change its figures on numerous occasions. Big companies, like Tesco, getting it wrong. Twoeds refers to Ed Milliband and Ed Balls who hope their figures will come out ok.

Over my 50 years in Accountancy the one thing I have learned is that you can make figures mean anything you like, which your previous post proves.

Thanks (0)
avatar
By AndyC123
25th Sep 2014 09:56

Amazing!

"the fact that when Her Majesty's Inspectors of Taxes do enquiries into people's tax returns, on average, white collar people, such as accountants, only declare 60% of what they earn." 

 

That's a fact is it?  Accountants (on average) only delare 60% of what they earn?

And you have proof of this?

Thanks (0)