HMRC publishes its latest Tax Gap – TaxWatch analysis
HMRC’s Tax Gap has increased for the second year in a row on a like-for-like basis.
The latest HMRC estimates of non-compliance are £32bn for 2020-2021, or 5.1% of total tax revenues. This is the same gap as a percentage as seen in last year’s publication covering 2019-2020.
However, this year’s figure includes a £0.7bn revision downwards to compensate for lower compliance activity during Covid. This means that on a like-for-like basis HMRC’s Tax Gap increased.
Of the £32bn total tax gap, at least £14.4bn, or 45%, of it is attributable to fraud. Fraud as a percentage of the total tax gap hasn’t been this high since 2016-2017. This is based on the limited data available, and the actual figure for tax lost to fraud will be much higher. TaxWatch’s methodology explaining how we arrived at this figure is explained in full detail in our assessment of the 2019-2020 figures, see our report The Tax Fraud Gap – 2021 edition, … Continue reading
As TaxWatch has previously highlighted, HMRC’s tax gap publication significantly underestimates the true scale of non-compliance with the tax system. Profit shifting by multinationals appears not to be counted at all.
Estimates of error and fraud in the HMRC-administered Covid-19 support schemes are also not included in the figures and reported on separately. These run into the billions of pounds.