Tax blunderers costing four times more than avoiders
The inspiration behind the numerous attacks contractors face by HM Revenue & Customs officially lessened last week, as the ‘tax gap’ was disclosed to have shrunk.
In fact, as a proportion of overall liabilities, the gap between the amount of tax that should theoretically be collected and the amount that is actually collected fell to 6.5%, down from 6.9% in the previous tax year.
But contrary to popular belief, of the £35.9billion still missing, just £2.2bn is down to tax avoidance, making it a smaller contributor to the gap than evasion (£5.2bn) and even error (£3.2bn).
Like another contributor to the gap -- ‘not taking reasonable care’ (£5.5bn or 15% of the gap), taxpayer errors are on the increase (9% of the gap), and deprive the Revenue of £1bn more than avoidance does (6% of the gap).
“[We are] concerned over the growth in unintentional non-compliance,” said the Chartered Institute of Taxation (CIOT), which pointed out it accounts for 24% of the gap. “We will continue to push for the more simplified and workable tax system”.
Without such a system, the institute fears that innocent mistakes made in preparing tax calculations or in completing returns, even where taxpayers take ‘reasonable care,’ will not abate.
“A billion pounds more is lost in errors than in tax avoidance,” said the CIOT’s John Cullinane. “If the tax authority needs more resources to directly help taxpayers to pay the correct sums, then we suggest...they should get it.”