Measuring the Tax Gap - HMRC report

HMRC has issued its annual report on measuring the tax gap. Download here.  The methodology adopted is here.  (2009 version of the report is here.)

Others, being ecomonists and statisticians, of which I am most certainly neither, will doubtless pore over the detail and continue to argue over the accuracy of this latest estimate of £42 billion. In the current climate, political motive will prevail over empirical evidence and plain old fashioned commonsense.

But, regardless of the extent of the gap, what realistically can, or will, be done about it ? It is a view that will not be popular with many, but I would venture that there is no much that can be done and even less that will actually be done.

Not much that can be done; because HMRC has neither the skills nor the attitude of purpose required.  In an era when the volume of the law has grown exponentially, and the quality of that law correspondingly fallen, poorly skilled civil servants armed with an aggressive attitude simply cannot compete, despite HMRC's still vast comparative resources, with the skills and knowledge possessed by the private sector.  In no better environment is this demonstrated than by HMRC's increasingly indiscriminate use of the Code of Practice 9 procedure to tackle what are, as often as not, instances of tax irregularities which are nothing more thrilling than good old fashioned back duty jobs (younger viewers best ask their older colleagues). Such jobs were, of course, once the preserve of TOHGs (younger viewers, again) at local office level within the old Inland Revenue but, through endless reorganisations, now merit the attention of specialist divisions with allegedly specialist staff. When the system has been reduced to badging relatively minor investigations as civil fraud, what is left for the bigger more complex irregularities which need to be tackled and which will make up the biggest element of the tax gap ?

Not that much which will actually be done; because the political will for change rests with the same politicans and mandarins that have created the current state of affairs.