A lack of anti-avoidance tax law and cuts to public services are contributing to the UK’s yawning tax gap.

New research by Tax Research LLP, on behalf of the Public and Commercial Services Union, shows that the tax gap – defined as “the difference between the tax that should be paid in the UK if the tax system worked as parliament and HMRC intended, and the amount actually paid” – topped £119bn in 2013-14 and “is rising steadily”.

The figures clash significantly with those produced by HMRC, the government’s tax collecting body. The PCS-commissioned research estimates that over 2013 and 14 the UK lost £73.4bn to tax evasion (“tax lost when a person or company deliberately and unlawfully fails to declare income that they know is taxable or claims expenses that are not allowed”) over the course of the studied period, dwarfing the official government estimate of £22.3bn.

The other areas that contribute to the tax gap are tax avoidance – defined as “tax that is lost when a person claims to arrange their affairs to minimise tax within the law in the UK or in other countries”. The PCS estimates tax avoidance costs the UK economy £19.1bn over the course of the year. Tax debt – tax which is not paid by a person or company who knows that they owe it, but who don’t pay or delay payment – cost the UK £18.2bn over 2013-14. Continue reading »