HMRC’s official statistics for the 2013-2014 financial year indicate a ‘tax gap’ of £34bn, meaning that 6.4% of estimated tax liabilities were not paid. According to the official report, this denotes the lowest percentage gap on record, down from 8.4% in 2005-2006. The following data, taken from the HMRC report, breaks down the £34bn figure:
However, it is very important to note that independent reports, measuring a broader range of tax avoidance practices, have calculated a much higher figure. While it is difficult to measure and report on the tax gap, a report by Tax Research UK, commissioned by the PCS Union in 2014, put the figure at a staggering £119.4bn.
What is the opportunity cost?
Taking the higher Tax Research UK figure, a tax gap of almost £120bn in 2014, gives a much higher opportunity cost. According to the Guardian, this sum was worth more to the government than VAT receipts (£111bn) that year, and would have paid for the education (£98bn) and transport (£23bn) budgets put together, as well as 85% of the cost of the health budget (£140bn).
Using HMRC's own £34bn figure, together with statistics from the budget breakdown, the value of the tax gap would cover the whole of the social protection budget, a quarter of the health budget or half the annual budget deficit.
It is clear that the money we are cheated out of by tax aviodance and tax evasion could be used to provide a much needed boost to vital public services, or a welcome reduction in borrowing. Those who avoid tax need to make their fair contribution to their country. Patriots pay tax.