HMRC says Latest Tax Gap Lowest on Record

HMRC has released figures for the tax year 2018-2019, which estimate the “tax gap” for the last financial year to be 4.7%; a record low. 

The figure describes the margin between the amount of tax theoretically owed to the Revenue and the amount actually collected. 

The government claims that 95% of tax due in 2018-19 has been paid, putting the shortfall at around £1.7 billion.

The figures saw drops across the board for all tax categories, with most coming in under 5%. The gap for Corporation Tax appeared to be the most stubborn, remaining the category with the largest shortfall at 7%. 

In a statement released on Thursday, Jesse Norman, Financial Secretary to the Treasury said:

“Having a secure and comprehensive tax base is what allows the Government to pay for public services, but also to provide financial support in a crisis”. He added that the coronavirus pandemic had highlighted “the importance of everyone playing their part and paying the tax that is due.”

These most recent figures mark the latest in a long-term downward trend in the tax gap, falling from 7.5% in 2005-06, the first year for which figures are available. 

HMRC’s Chief Executive Jim Harra pointed to recent efforts by the government to use digital record-keeping and other digital tools to make it “straightforward” for taxpayers to pay the correct tax on time, while also tackling those “who deliberately set out to cheat the system.”

Since 2010, the government claims to have introduced over 100 measures to tackle tax avoidance, evasion, and other forms of non-compliance, which it says has secured over £220 billion in revenue that would otherwise have gone unpaid. 

It remains unclear what effect COVID-19 will have on the tax gap, with any impact not likely to be seen until 2021.

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