Tax Avoiders – How Much Are They Costing Us?

Disquiet has been brewing for some time about tax evasion. As if the Panama Papers weren’t enough, 2017 brought the damning revelations of 13.4 million records, each of which add to the web of avoidance schemes around the world.

Much of the blame lies with huge, multi-national corporations that are seeking to exploit loopholes in the system. It is a moral issue. It is also a question of being vigilant and thinking seriously about how we, as a nation, can stop the biggest proto-taxpayers funnelling their profits into schemes that don’t benefit us.

So how much are they costing the UK? What could we get in return? Let’s explain…

Assessing the damage

The first thing to be aware of is that some of HMRC’s reported tax losses come from genuine mistakes, oversights, and misinterpretation of law from regular, non-PAYE income citizens. Year on year, the Treasury has stated it has been short of £30-£35bn in predicted tax revenue since 2006. This figure accounts for inflation, a fluctuating economy and tweaks in tax percentiles.

If we take the financial year 2015-16 as an example, £5.2bn is pinned on illegally hidden activities, whilst a further £1.7bn is claimed to have vanished because of purposeful tax avoidance. But these numbers have been decried as inaccurate; it is obviously very difficult for a government to assess something completely hidden from official British records.

Researcher Richard Murphy gazed into the ‘shadow economy’ – i.e. goods and services sold either illegally or within dense, exploitative tax legislation overseas – and came up with an estimate approaching £120bn in 2014. That’s 10% of the entire UK GDP for that year. More than 300,000 businesses are erased from the Companies House annually before they’re due to submit their accounts.

Many citizens would argue that it is wrong for a business or individual to use public infrastructure (such as roads, hospitals, collective transport, certain energy suppliers, etc.) without repayment. In total, this is doing huge damage to the UK, especially in light of austerity measures that, in many cases, have taken public services to breaking point.

A list of the casualties

To put the tax gap in perspective, it’s worth taking a look at how these funds could have been spent. Here are some insights from charities, economists and researchers:

Jeremy Corbyn stated in September 2017 that 365 schools or 21 hospitals could have been funded fully over the previous five years. He is basing this on £12.8bn: a statistic provided by the House of Commons Library, which doesn’t factor multinational tax arrangements.

Richard Murphy himself claims that the cost of tax avoidance is almost as much as the entire NHS budget, as well as enough to pay for British state schools with £20bn left over.

According to the housing and homelessness charity Shelter, £1bn can buy 16,600 new social homes. In the same article, the IPPR think tank is quoted as saying the same figure would fund 180,000 jobs in the public sector. Even taken together, £2bn is a small fraction of the total, assuming the far more generous tax avoidance reports from HMRC are valid.

There is increasing pressure from the British public to clamp down on tax avoidance, tax evasion and international shell schemes. From an individual’s perspective, it’s never been a more pertinent time to stay on the right side of the taxman…

Use GoSimple’s Self Assessment software to ensure you pay what you owe in a climate where the magnifying glass is turning on those who shirk their social duty.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.