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HMRC’s latest figures estimate the tax gap for 2010/11 at £32bn, or 6.7% of tax due, compared with 7.1% in 2009/10.
The gap is compiled from 30 separate estimates for different taxes, as explained by Ed Hagger in his article Mind the gap.
It is also broken down into the reasons for why tax has not been collected. These include evasion, avoidance, customer error, the hidden economy, criminal attacks and cases where tax cannot be collected because businesses have become insolvent.
HMRC’s tax gap estimates go back as far as 2004/5. These are regularly revised to take account of improved methods and the latest available information, some of which has long lags as it takes time to settle tax enquiries.
The figures published for 2010/11 include revisions going back to 2004/5, including downward revisions by the Office for National Statistics that affect the VAT gap.
The UK is one of the few countries to publish its estimate of the tax gap, but as methodologies vary from country to country, caution is needed when comparing figures.
