Friday, 18 November 2016

This week's award for mind numbing innumeracy goes to...

... The Taxpayers' Alliance:

Every year Her Majesty’s Revenue and Customs (HMRC) estimates how much tax revenue is lost to the black market. The annual report, Measuring Tax Gaps, is an annual report looking at a range of ways in which HMRC loses out on revenue from a range of direct and indirect taxes.

The tax gap is largest when it comes to duties on tobacco, alcohol and diesel – the most highly taxed products.

That was news to me, so I thought I'd better check HMRC's actual report first before I lay into them.

By absolute amount of tax 'lost', the rankings are:

Income Tax, National Insurance Contributions & CGT: £15.5 bn
Gross Profits Tax Value Added Tax: £12.7 bn
Corporation tax: £3.7 bn
Excise duties: £2.8 bn

By amount 'lost' relative to amount of tax collected, the ranking are

Gross Profits Tax Value Added Tax: 10.3%
Corporation tax: 8%
Excise duties: 5.3%
Income Tax, National Insurance Contributions & CGT: 5.2%

So the 'tax gap' for Excise Duties is smallest in absolute and relative terms. Duh.

Sadly, HMRC are not responsible for Business Rates (quasi-LVT) so do not publish the 'tax gap' for that which is - unsurprisingly - about 1% or 2%.


Bayard said...

So where do they get that figure of £31.6 billion from? Have they just made it up? and why are they lying about excise duties?

Mark Wadsworth said...

B, easy, they took the upper range of estimates rather than the middle figure and multiplied it by a random number of years.

This is like the "public health" stuff about "12 million preventable deaths from smoking over the next fifty years".

As to why, I have no idea. Maybe the TPA are now sponsored by the tobacco and fuel lobbies?

Bayard said...

"Maybe the TPA are now sponsored by the tobacco and fuel lobbies?"

Or dominated by retired colonels who like fast cars, claret, whisky and smoking.

benj said...

So evasion + avoidance = tax gap?

Why such a big gap for Corp Tax?

Mark Wadsworth said...

BJ, because they are comparing two unknowns. There are plenty of businesses who wouldn't actually need to pay 20% corp tax in the UK but who pay it anyway because it's cheaper than paying somewhere else, or who are basically just laundering money.