IoM Customs and Excise Sets Up 'Tax Gap' Team

by Jason Gorringe, Tax-News.com, London

01 April 2003

The Customs and Excise department in the Isle of Man has set up a so-called 'tax-gap' team in order to counter shortfalls in VAT receipts.

The new team of three will function along the same lines as a similar unit in the UK, which has reported a 14% shortfall in VAT revenues. Though the Isle of Man has no official records available to indicate how much revenues are falling short of what they should be, Andrew Corcoran, deputy collector with the Manx Treasury's Customs and Excise division says that trends between the UK and the Island are usually well correlated.

The team will not be focusing exclusively on VAT returns, but expects to investigate anyone who does not complete a return on time or at all, as well as those refusing to pay. However, one area the unit is particularly interested in is firms who are at or just below the £55,000 threshold level for VAT registration. Corcoran believes that there are companies which use deliberate techniques to keep their revenues below this level in order to avoid paying the tax. "Those are the people we will be looking at closely" said Corcoran.

According to the deputy collector, the margin between income from direct and indirect taxes has now narrowed, and this makes the Customs and Excise team's task all the more important in protecting a significant portion of government revenue. In the 2002/2003 tax year, Customs and Excise estimates its returns will total £250 million, of which £194 million will be in VAT. Next year's forecast is even greater, with £211 million expected to come from VAT out of total revenues of £265 million.

Paul Gelling, who leads the the Island's tax enforcers said the department has come under increasing strain since the September 11 attacks, and the enforcement division has undergone certain adjustments to ensure the most efficient use of staff to cope with the heavy workload currently being tackled.

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