Despite the government ‘s crack down on errant taxpayers and a £1.3 billion investment in HM Revenue & Customs (HMRC), more money is lost to fraud than tax avoidance, according to the latest official statistics.
Tax experts have looked at figures published by HMRC and discovered 600% more tax is lost to criminal activity than tax avoidance.
The numbers come from HMRC’s assessment of the annual tax gap – the difference between money flowing into the Treasury compared with the amount HMRC believes should have been paid.
The latest figures are for the 2013-14 tax year.
The government calculated the tax gap was £34 billion or 6.4% less than was expected to be collected as tax.
Tax black hole
Tax cheats were blamed for underpaying by £2.7 billion, which was down from 32.8 billion the year before.
Meanwhile, crooks got away with £15.7 billion – including £5.1 billion to online theft, £4.4 billion in criminal tax evasion and £6.2 billion going to the black economy, which lets people work for cash in hand that they do not have to declare.
John Cullinane, tax policy director at professional body the Chartered Institute of Taxation, said: “Although HMRC has concentrated a huge amount of resources on stopping tax avoidance, the real black hole in the tax collection figures comes from illegal activity.
“Crime and evasion is responsible for nearly six times more lost tax than avoidance and all the money and time spent chasing down avoidance little changed the amount of tax collected.
“The government is right to chase down those who do not pay the right amount of tax, but more needs to be done about criminal activity.”
Careless mistakes cost £6 billion
CIOT also pointed out that the statistics do not include money spirited offshore by multinational companies so they do not pay corporation tax in the UK.
Recently, social media giant Facebook reputedly paid a little more than £6,000 in corporation tax in the UK even though the company collected millions from advertising that was invoiced from offshore.
“This is frustrating because no laws are broken by these companies but they know how to manipulate international tax rules that the rest of us cannot access,” said Cullinane.
The figures also revealed that careless accounting and mistakes filling in tax returns were costing the Treasury around £6 billion a year.