The incumbent financial secretary of the Treasury has lent support to HMRC along with their recent figures regarding the tax gap. Meanwhile, the dataset has been rejected on a wider scale.
According to Jesse Norman, the tax gap of UK was maintained low because of HMRC’s efficiency and how it managed to limit tax avoidance and evasion.
Overall, these tax figures have been lambasted and discredited as “laughable”. Experts have reservations over how HMRC removed certain activities from the gap like schemes known to take advantage of legal loopholes and corporate profit-shifting. Tax Watch—a reputable tax investigation firm—also called these figures as “flawed”.
Another tax analyst, Richard Murphy conveyed his thoughts via his blog and agreed with these criticisms that were published in the Independent. He specifically revealed three areas where HMRC has been ineffective: a trickle-down impact of underpaid VAT, profit-sharing, and the limited use of HMRC audits.
Mr. Murphy explained that the £35bn tax gap has lead HMRC to rejoice that the 5.6% of “assumed” tax yield has provided for a watershed moment—this figure was never this low. Mr. Murphy is confident that the actual figure is at least £90bn.
The CIOT also opined that as opposed to this ‘trumpeting’, the government might dislike the annual figures of the HMRC.
The CIOT remarked that it is quite complex to estimate this gap. They highlighted that while these statistics portray efforts that decreased the owed tax, however, the uncollected seems stalled at the moment.
The institute stated that “a sustained fall of three quarters in the share of the potential tax take being lost to avoidance since 2005 is significant and a tribute to the actions of successive governments”.
However, the institute explained that these figures indicate that illegal activities like tax evasion have cost seven times as much as tax avoidance.
Therefore, the Glyn Fullelove, the CIOT president, believes that revenue has to put more efforts towards utilising its resources for prosecuting and investigating those people who indulge in tax evasion.
He said that the report figures demonstrate how complex the tax system is. For example, just because taxpayers unintentionally made a few mistakes in the tax management, it resulted in a £10bn tax gap. HMRC on the other hand classifies this conduct as “error or a failure to take reasonable care.”