UK Tax Gap Widens 

The UK tax authority, HM Revenue and Customs (HMRC), has revealed that the UK tax gap grew to 6.8 percent in the fiscal year 2012-13, up 0.2 percent year-on-year.

The tax gap, which measures the amount of tax that is theoretically due but goes uncollected, totaled GBP34bn (USD54.4bn) in 2012-13, HMRC said, attributing the increase to poorer value-added tax (VAT) collections in particular.

HMRC said, while the VAT gap expanded from GBP11.4bn to GBP12.4bn, or 10.9 percent of theoretical collections, last tax year, the portion of the tax gap owing to tax avoidance fell from GBP3.4bn to GBP3.1bn.

Meanwhile, tax evasion cost the UK revenues worth GBP4.1bn, criminal activities GBP5.4bn, and non-payment GBP4.4bn. The hidden economy was estimated to account for GBP5.9bn of the lost revenues.

Looking at longer term trends, HMRC highlighted that the tax gap since 2005-06 (the first year on record) has fallen from 8.5 percent, delivering an additional GBP43bn in tax.

Financial Secretary to the Treasury David Gauke said: “Since 2010-11, the percentage tax gap has stayed lower than at any point under the previous Government, saving the country GBP4bn. Today’s figures show that there’s still more work to do, but our continued drive to tackle avoidance means that avoidance is down. In 2012-13 HMRC achieved a compliance yield of GBP20.7bn, rising to a record breaking GBP23.9bn in 2013-14.”

“The UK has one of the lowest tax gaps in the world but HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years.”

Patrick Stevens, Tax Policy Director at the Chartered Institute of Taxation (CIOT), commented: “GBP34bn is a large amount of tax not to be collecting, and there appears to have been a small uptick after years of the tax gap figure falling. However, the figure still compares well to international jurisdictions. The most recent estimate of the tax gap in the US, for example, put the tax gap there at more than 14 percent of total tax liabilities, more than double the percentage share in the UK.”

Source: taxnews- UK Tax Gap Widens

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