 More investment needed to close the ‘tax gap’
21 September 2011: PKF Accountants & business advisers calls for greater investment in HM Revenue & Customs (HMRC) in order to close the so-called 'tax gap' more rapidly.
John Cassidy, tax investigation and dispute resolution partner at PKF, said: "Nobody, including HMRC, really has any idea what the true tax gap is. It is in reality an educated guess based on numerous assumptions. That said, if comparable calculations show it reducing year on year, then it is clearly heading in the right direction. But progress to date has not been as rapid as it should have been considering the size of the budget deficit.
"The raft of new measures announced since last year’s Spending Review suggest that HMRC recognises this and has made a deliberate effort to pick up the pace. Various amnesties, including the VAT Initiative campaign, a more joined-up approach to tackling evasion (such as cross checking individuals' tax returns against Land Registry data on property ownership to identify buy-to-let landlords who are not declaring their full earnings) and the recruitment of extra staff should start having a positive impact on the shortfall in the future. HMRC has also started to identify holders of tainted assets in Swiss bank accounts with a view to opening a vast amount of potentially lucrative investigations before the recently announced tax deal with Switzerland comes into effect in 2013.
"But do these measures go far enough? HMRC is spending £917 million to raise an additional £7 billion in revenue each year by 2014-15 which, if successful, will translate into a staggering rate of return on that initial investment. Looking at it in these terms, there is a strong argument for pumping even more funding into HMRC as the resulting benefits – which will accrue each year – far outweigh the one-off costs. Given the estimated size of the tax gap, we are a very long way from seeing diminishing returns on such activity."
Ends
For further information, please contact:
Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Channel Islands) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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