Figures from HM Revenue and Customs (HMRC) show the amount of uncollected tax is estimated to be £35bn for 2009-2010. That is £4bn less than the year before, and the lowest since 2004-2005.
Tax gap woes
Surprisingly, HMRC states that the reason for the drop in uncollected tax was the reduction of VAT from 17.5% to 15%. This occurred from December 2008 until the end of 2009.
In that year, 7.9% of all tax went uncollected, a drop the previous year’s 8.1%.
Still, VAT remains the type of tax that is most often neglected, with £11.4bn in VAT being uncollected. That means a full 13.8% of all VAT was not collected in 2009-10.
The VAT gap makes the next largest loss seem small, at £5.8bn of uncollected income tax due to self-done taxes that inaccurately measured returns.
Still, the HMRC calculates that the amount of uncollected tax due to deliberate tax evasion is relatively small.
£14.5bn in direct taxes — meaning income, national insurance, and capital gains taxes – went uncollected in 2009-10, but only £1.3bn of this is estimated to be from “ghosts,” or people who do not declare an income.
£1.8bn of uncollected tax is said to be from “moonlighters,” or people who do not report the income from their second job. Additionally, tax that was least effective was on hand-rolled tobacco, which saw 46% of all tax going uncollected.
These estimates and figures are collected by the HMRC as they pursue cases and check the books of businesses regularly.
The HMRC has gotten funding amounting to £917m to tackle the uncollected tax gap, and is tasked with raising an extra £7bn each year by 2014-15.
David Gauke, Exchequer Secretary to the Treasury, said, “Although these numbers show continued progress by HMRC in reducing the tax gap, there is no room for complacency.”
He went on to say that the HMRC is continuing to challenge tax evaders with offshore account and has created a new unit, which aims to target wealthy citizens and be sure they are paying their share.