As HMRC reports that the tax gap, the difference between the tax owed and what is actually paid, has fallen to the lowest recorded rate, Dr Arun Advani from the Department of Economics comments that there is still work to do on reducing that gap - particularly as the UK leaves the European Union.

Dr Arun Advani, Assistant Professor in the Department of Economics, said: “HMRC announced today a big reduction in the tax gap - the share of tax owed that is not received - from 5% in 2017-18 to 4.1% in 2018-19. However, the gap for some taxes components is still large: more than £1 in every £5 is not collected from self-assessment business taxpayers. At £4bn the amount of money at stake is not far off what a government could get from raising the basic rate of income tax from 20% to 21%, and the overall tax gap is £31bn, so it is important that more is done to combat non-compliance. At the Budget in 2020 the government made available some additional resources for HMRC to further reduce this gap, but in coming years more will be needed. This is particularly true as today's report shows VAT non-compliance has previously been underestimated, and that will be a growing area of concern once cooperation with the EU ends.”

9 July 2020

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