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UK's tax gap rises by £1bn to £35bn UK's tax gap rises by £1bn to £35bn
(about 2 hours later)
Britain's tax gap has increased by £1bn in the last year to £35bn, according to the latest figures. The amount of tax lost through non-payment and avoidance increased last year to £35bn, according to official figures released on Friday.
Revenue & Customs (HMRC) said the value of the tax lost through non-payment and avoidance schemes had increased from £34bn in 2010-11 to £35 billion in 2011-12. A HMRC spokesman said the figures were part of a longer-term trend for clamping down on individuals and companies avoiding or evading tax. Revenue & Customs (HMRC) said the gap between tax owed and tax paid had increased by £1bn in 2011-12, up from £34bn the previous year, which it partly blamed on the rise in the standard VAT rate to 20%, which meant the amount owed had increased.
The year-on-year increase was mainly due to an increase in the VAT gap, reflecting the rise in the standard rate of VAT to 20%, he added. But the increase has been seized upon by critics as evidence that the government is failing to stop criminals or close loopholes. An HMRC spokesman said the longer-term trend was still downwards, as inspectors clamp down on individuals and companies. But the increase has been seized upon by critics as evidence that the government is failing to stop criminals or close loopholes.
Mark Serwotka, the head of the union PCS which represents HMRC staff, said the figures were an underestimation of the true tax gap and that ministers' claims that officials were clamping down on tax avoidance and evasion while cutting staff were nonsense. Mark Serwotka, general secretary of the union PCS, which represents HMRC staff, said the figures were an underestimation of the true tax gap and that ministers' claims that officials were clamping down on tax avoidance and evasion while cutting staff were nonsense.
"We think this seriously underestimates the extent of uncollected tax – our research shows our public finances miss out on more than £120bn a year. "But even by the government's estimate, these are huge sums that we are owed and should be collected, and it makes no sense to cut staff and resources at the department responsible for doing that," he said. "We think this seriously underestimates the extent of uncollected tax – our research shows our public finances miss out on more than £120bn a year," he said. "But even by the government's estimate, these are huge sums that we are owed and should be collected and it makes no sense to cut staff and resources at the department responsible for doing that."
Fiona Mactaggart, a Labour member of the Commons public accounts committee, which has been highly critical of HMRC's failures to close to the tax gap, said HMRC was too relaxed about this problem. Fiona Mactaggart, a Labour member of the Commons public accounts committee, said HMRC was too relaxed about the problem. "The government targets benefit fraudsters, but that bill is a fraction of this figure. If we dealt with the tax gap, we would get rid of the deficit."
"The government targets benefit fraudsters, but that bill is a fraction of this figure. If we dealt with the tax gap we would get rid of the deficit. The government and HMRC need to get their priorities right," she said. The tax gap is compiled from about 30 separate estimates for different taxes. It is broken down by type of tax, customer group and customer behaviours, including tax evasion and avoidance, customer error, the hidden economy, criminal attacks and where tax cannot be collected because of insolvency.
The tax gap is compiled from around 30 separate estimates for different taxes. It is broken down by type of tax, customer group and customer behaviours, including tax evasion and avoidance, customer error, the hidden economy, criminal attacks and where tax cannot be collected because businesses have become insolvent. HMRC officials said the gap had fallen steadily over the past six years, from 8.3% of tax due in 2005-06 to 7.1% in 2010-11 and 7% in 2011-12.
HMRC officials said the gap had fallen steadily over the last six years, from 8.3% of tax due in 2005-06 to 7.1% in 2010-11 and 7% in 2011-12. The Exchequer secretary, David Gauke, said: "The vast majority of businesses and individuals pay the taxes they owe. But where they don't, it is for HMRC to challenge non-compliance fiercely.
Exchequer secretary David Gauke said: "The vast majority of businesses and individuals pay the taxes they owe. But where they don't it is for HMRC to challenge non-compliance fiercely, protecting money that would otherwise be lost. " Since 2010, the government has invested nearly £1bn in additional compliance initiatives over the spending review period. HMRC is on track to secure a further £44bn in tax revenues over the next two years."
"Since 2010, the government has invested nearly £1bn in additional compliance initiatives over the spending review period. HMRC is on track to secure a further £44bn in tax revenues over the next two years." The figures suggest £5.1bn was lost as a result of evasion, £4.7bn as a result of criminal activity including fraud and smuggling, and £4bn through avoidance schemes.
Official estimates indicated £11.4bn of VAT, £15.3bn of income tax, £4.7bn in corporation tax and £2.5bn excise duties was not collected in 2011-12.
Labour said the figures showed the government was failing to tackle the problem.
Shadow exchequer secretary Shabana Mahmood said: "At a time when millions are struggling with the rising cost of living and the deficit is high, it's even more vital that everyone pays their fair share of tax.
"But these figures show the Government is failing to tackle tax avoidance and evasion with the value of the tax gap now up to £35 billion," she said.
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