Figures show that the shortfall decreased from 6.8% to 6.4% of tax due for 2013/2014, remaining at approximately £34bn.
Of the £34bn, around £2.7bn was lost due to tax avoidance, down £2.8bn from the year before. Moreover, £6.2bn was lost to the ‘hidden economy’, £5.1bn to criminal attacks and £4.4bn to tax evasion – totalling £15.7bn lost due to illegal activity.
John Cullinane, CIoT’s tax policy advisor said that the HMRC needs to put a lot more effort into prosecuting those who contribute to this deficit.
He said: “The government are right to have put extra resources in this direction, as well as tackling artificial and abusive attempts to avoid tax,”
“It should be noted though, that HMRC’s avoidance figure does not include a lot of what gets described as avoidance in the newspapers, especially in relation to multinational businesses. This is because, as HMRC puts it, it ‘is the result not of frustrating UK law but of exploiting the international tax framework’.”
According to stakeholders, a lot more needs to be done to rectify the cash value of the gap. This is mainly because it hasn’t dropped below £30bn for over 10 years – the lowest was in 2009/2010 at £31bn, with the highest reaching £37bn in 2006/2007.
As a result of these damning figures, the ICAEW wants an increase in the HMRC’s budget to address the sizeable gap.
“Clearly HMRC needs to keep spending in this area if it is to continue reducing the tax gap year on year,” head of the institute’s tax faculty Frank Haskew said. “We would like to see assurances from the Chancellor in next month’s Autumn Statement that HMRC will be protected from further budget cuts and instead should be given more resources to improve service standards and reduce the tax gap. Given the substantial reduction in staff and budget over the years, HMRC deserves credit for making this progress.”