Sunday, December 13, 2009

Tax system flaws cost UK £40bn a year

From the FT:

"Loopholes, evasion and other flaws in the tax system are costing the country about £40bn in revenue a year, according to an official estimate likely to inflame arguments over how to repair Britain’s biggest ever peacetime deficit."

FT subscribers can see a more detailed breakdown here. But things have been getting better in some respects:

"The sums retrieved from reluctant or error-prone taxpayers have risen 60 per cent over the past three years, according to Revenue & Customs statistics."

and the first story added:

"Richard Murphy, a campaigner and TUC adviser, accused the Revenue of seriously underestimating the scale of the tax gap, which he believed was likely to total about £100bn. “People should be angry about it,” he said.

Read more on Murphy's analysis here.


Anonymous Adrian Wrigley said...

How can tax evasion be a "cost" to the country? Surely evasion is just a financial transfer? If we get mixed up between costs and transfers, we'll be in a very confused state indeed!

In fact you might infer that a lot of tax evasion is actually a benefit to the country, not a cost. Tax evaded eliminates the collection costs both to the government and to the non-taxpayer. And of course small businesses evading tax may be inviable if the cost of payment (professional advices) is added.

Of course there are costs of tax evasion - businesses may be out-competed by less efficient but tax-evading rivals. And of course the government is induced to employ investigators. But calculating the cost or benefit to the country of tax evasion is nigh impossible.

Any such costs, of course are rightly attributed to design of the system, rather than individuals. If the system were abolished, the cost wouldn't be incurred. Most of the cost results from the government trying to get large numbers of businesses and people to supply the information needed for tax bills. Carbon Tax, Council Tax, Road Fuel Duty are tax three obvious alternative bases to the costly and nebulous "income" and "value added" tax base.

6:20 pm  
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11:39 am  

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