UK Government Unable To Measure Size Of Tax Gap

by Robert Lee, Tax-News.com, London

09 November 2004

UK Paymaster General Dawn Primarolo admitted in response to questioning last week that there is no reliable way of measuring the tax gap between what the government collects in tax and what the nation’s taxpayers owe.

In a written answer to a question tabled by Caroline Spelman, the opposition spokeswoman for local government, Ms Primarolo responded by observing that it is “very difficult” to measure the size of the tax gap, and that at present, “there is no reliable method for estimating it.”

When asked by Spelman if the government had analysed the impact of rising tax rates on the levels of tax avoidance, Primarolo replied:

“Tax avoidance undermines the principle of fairness that underpins the tax system and the Government keeps under review factors that may influence the behaviours of taxpayers.”

The UK government has, however, seemingly taken no concrete steps to study or quantify the tax gap, which was recently estimated at around £14 billion, preferring instead to rely on calculations provided by the ‘big four’ accounting firms.

Citing a report produced by Lord Grabiner in 2000, Primarolo earlier in the year echoed the general view held by the government, that the tax gap is “difficult, if not impossible to measure".

Recommended