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The following is from Tax Justice UK
HMRC is missing at least £40 billion in unpaid tax.
This figure – known as the ‘tax gap’ – was released by HMRC last week.
The tax gap is the difference between the amount of tax owed and what the government collects.
Missing this amount of tax is simply unacceptable at a time when the health service and public services are ‘on the brink of collapse’ from underfunding.
Unpaid tax is growing
The tax gap has increased in real terms to £40 billion from £36 billion in 2021-22.
That’s an eye watering sum of money. It’s also an under-estimate as it doesn’t include money that wealthy companies shift offshore, as our friends at TaxWatch point out.
To put £40 billion in context, it’s enough to cover government spending on the police, or nearly half the money spent on schools.
“It is not just or right for billions of pounds of tax to be left uncollected,” my colleague Rachael said, as was reported by CityAM and the i newspaper.
Why we’re missing £40 billion
HMRC is under-resourced for the job at hand. They don’t have the staff to properly investigate and chase tax dodgers – or follow up on taxpayer mistakes.
This isn’t our view, but that of the Parliament’s Public Accounts Committee.
MPs slammed the government last year for underfunding HMRC – and insisted that more money must be invested into tax investigations.
If we closed the tax gap
With more resources and investment, HMRC could have the teeth to claw back more unpaid tax – and close the tax gap.
If the tax gap were to be closed by just 10%, this could cover the cost of ending the two child benefit cap.
Closing the tax gap by 20% could pay for around 63,000 nurses, 44,000 teachers, and 41,000 police officers.
The collection of unpaid tax could be transformative for public services and the social security net in the UK.
It’s encouraging that all the major parties, including Labour, the Conservatives and Lib Dems, are promising to invest more in HMRC to narrow the tax gap after the election.
A global billionaires tax
I want to share some exciting news with you: global support for taxing billionaires is growing.
A report released this week is calling for a coordinated global minimum tax for billionaires.
The work by leading tax economist Gabriel Zucman proposes a new global tax on billionaires and details how it could work. It was commissioned by the Brazilian presidency of the G20, a grouping of the world’s major economies.
Zucman found a pattern – that billionaires pay lower effective tax rates than everyone else.
This deprives governments of significant amounts of tax revenue and contributes to the concentration of wealth in the hands of a small minority.
Zucman recommends a 2% minimum tax on the wealth of billionaires, in-line with our own proposals for UK-based billionaires.
Supportive statements were made by government Ministers in Brazil, France, Spain, South Africa, Belgium, and Colombia when the idea for a global minimum wealth tax was first announced.
The real problem is overseas based companies, we hear about Google, Starbucks, Ebay and Amazon, there are thousands of other smaller companies doing the same, mostly online trading. There needs to be an extra tax based on turnover that any company based overseas pays and it needs to be collected monthly.
And there is a degree of movement between the large accountancy firms and the civil service - both ways.
There are actually some people who believe in service - old fashioned I know but it does exist.
It is all down to resources in the end and HMRC can only do as much as their numbers/training allow.
But make no mistake, HMRC do not just go after the small trader.
Tax affairs are private, large international companies are always being investigated but it is always very complicated with inspectors being up against the best accountants and lawyers money can buy - but there are some very notable successes involving many millions of pounds - it is just simply never publicised, for obvious reasons.
Criminal cases are of course reported.
But all these cases frequently take years to investigate and settle.
But the gap simply shows just how large the problem is.
Hmmmm I was overpaid for tax credit and have been paying about £14 a month for the last two years..
They seem to go after the small fry…🤷♀️
It should be cost-effective to pay the commercial rate for accountants / tax lawyers for HMRC. However their rates mesh into pay rates throughout the civil service and we can't afford to pay the whole civil service double. Also difficult to imagine an established tax lawyer "joining the opposition" even if the rates were equated, especially if they were tracking down the very rich & their income!
I agree fancy that. We need to recruit the best for HMRC and that means paying them the commercial rate. There is a tendency to underpay senior public servants. Yes, I know they get good pensions but are often salaried at about half what the private sector would value them at.
As I have also said multiple times, and is mentioned in the likes of the Guardian, a multi business has "better" tax lawyers than the HMRC can muster.
This missing unpaid tax issue, sadly, has gone on, and been debated, for at least 3 decades I think.
Apologies GSM. I just wondered whether the Accountants, Chartered or otherwise, were doing their job properly by not picking up the companies who evade their taxes.
(Better not go any further, digging holes etc! )
Grantanow
£40 billion is too much too write off. HMRC must be adequately funded to collect tax. The extra cost must be small compared with the tax to be gained.
The problem is companies set up to deliberately evade tax.
It’s not like PAYE where you pay month by month
A company is set up, but cannot be taxed until it produces a set of accounts, which is at least 18 months, there are many ways a company can avoid/evade tax then disappear taking all the money and leaving a trail of creditors.
I wonder what Auntieflo means by ‘so-called accountants’? I use a chartered accountant and she is certainly worth her fees. An accountant should save you more than they cost because they know the tax system. And a chartered accountant will operate within the law. I have no idea what a ‘so-called’ accountant is.
£40 billion is too much too write off. HMRC must be adequately funded to collect tax. The extra cost must be small compared with the tax to be gained.
“How do all the so called Accountants justify their earnings?”
By saving their clients tax, it makes a big difference how and when tax is declared and making sure all business allowances are taken.
Choose your accountant carefully
I have been trying to find out and then pay the tax I owe, due to HMRC’s error for the last four years. How many millions of people just like me are there? Many small amounts must add up to a huge amount never mind the millionaires!
It's far cheaper and easier for HMRC to go for the small fry than to undertake a big investigation. Also, cuts to their funding over the past 14 years has left them short of staff. The tax gap is shocking, but inevitable.
Doodledog, just what I was going to more or less say.
The unfortunate people who claim Carers Allowance (or whatever it is called), can be found quickly enough, and heavily penalised for earning just a few pence or pounds that they are allowed.
So why is it so difficult to chase and penalise those who deliberately evade their taxes?
How do all the so called Accountants justify their earnings?
Apologies if I have not put this as succinctly as I would wish, but it just makes me so mad.
Doodledog
It's interesting that the fear of losing money to benefit cheats results in persecution, sanctions and intrusion into their personal affairs, but when it comes to billionaires the thinking is all about appeasement.
I have no idea whether it is mostly billionaires who are responsible for such a huge tax gap, but given the assiduousness with which people on benefits are hounded, it seems only right that the same attention is given to tax cheats, regardless of their incomes/assets.
Yes. Surely anyone with a sense of fairness would agree...? 🤔
No chance. The EU haven’t been able to touch the likes of eBay etc who hide their squillions through Luxembourg.
taxjustice.net/press/eu-and-oecd-half-measures-fail-to-detect-luxembourgs-shadow-tax-rulings/
It's interesting that the fear of losing money to benefit cheats results in persecution, sanctions and intrusion into their personal affairs, but when it comes to billionaires the thinking is all about appeasement.
I have no idea whether it is mostly billionaires who are responsible for such a huge tax gap, but given the assiduousness with which people on benefits are hounded, it seems only right that the same attention is given to tax cheats, regardless of their incomes/assets.
Dinahmo
1 USA with 813 billionaires
2. China with 406
3. India 200
4. Germany 132
5. Russia 120
Thankfully I don’t have this worry
ronib
Global minimum wealth tax? Great idea but a magnet for any country not in agreement? Russia? China? India?
Possibly but who would want to live in any of those countries. Their wealthiest buy houses in Europe at inflated prices, their children are educated in Europe too. They like the freedoms that we have. I guess the same happens in the US.
We really should not focus on “billionaires”, there is not going to be a global tax agreement because if you have that much money you can buy your way into any country that will to give you a good tax deal.
I can’t imagine Monaco, BVI, US or even Ireland agreeing to a unified tax system
40billion. Rather eye watering!
It’s far too easy for companies to be set up deliberately to evade tax then disappear after 2 or 3 yrs, online trading makes this incredibly easy. If a company goes bankrupt and directors disappear, Corporation Tax, VAT and Council Tax goes unpaid, there are no assets.
Certainly would be.
Global minimum wealth tax? Great idea but a magnet for any country not in agreement? Russia? China? India?
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