Treasury loses £40bn each year on hidden sales tax campaigner claims

Treasury loses £40bn each year on hidden sales tax campaigner claims

It would make scale of tax evasion from sales going unreported to HMRC nearly four times larger than official figures suggest.

The Treasury is losing £40bn a year due to a shadow economy where firms and individuals deliberately hide sales from the taxman, according to a leading tax justice campaigner, Richard Murphy. His findings, if correct, would make the scale of tax evasion from sales going unreported to HMRC four times as big official figures suggest.

The report, published on Monday, has been swiftly rejected by HMRC as “seriously flawed”, although the tax campaigner said it had been peer reviewed by academics and other tax experts.

Murphy said only a minority of his estimate for tax lost to the shadow economy related to self-employed workers. The lion’s share, he says, is from 1.1m companies that tell HMRC they trade in the UK at an average loss of about £10,000, and from a further 400,000 companies he estimates trade in the UK but do not file a tax return. “We don’t recognise the estimate of tax lost to companies,” a spokesperson for HMRC said. “We are extremely good at identifying companies which need to send in a tax return, pursuing overdue returns and generally protecting tax payable when a return doesn’t appear.” The size of the total gap between what taxpayers owe and what they pay was last yearestimated by HMRC to be £35m, or 7%, shortfall for 2011/12, but that includes legal and illegal tax dodging, fraud and errors. It said the shadow economy and evasion was costing it £10.5bn.

Murphy, an accountant and tax specialist, who until March last year sat on an HRMC panel of anti-avoidance experts, has been leading a campaign questioning the accuracy of HRMC figures on Britain’s tax gap. Four years ago, when he last attempted to reach an independent figure, Murphy claimed HMRC’s estimate for the tax gap of close to £40bn was short of his calculation of £70bn.

  • The Guardian, 

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