Andrew Hubbard

Written by:

Andrew Hubbard

Consultant

Perceptions of tax avoidance and evasion are out of step with reality

HMRC regularly commissions independent surveys to get feedback from taxpayers on a variety of issues. Results have just been published into the experience of dealing with HMRC among mid-sized businesses – those with turnover exceeding £10m or more than 20 employees. HMRC can draw some satisfaction from the results of the survey, which show a consistent improvement across a wide range of criteria. For example, 47 per cent of businesses report overall confidence in the way in which HMRC is doing its job compared with only 15 per cent (down from 19 per cent) who said the opposite.

As ever delving into the detail produces some interesting observations. For example, while over 60 per cent of businesses reported that they thought that HMRC ensured that businesses paid the correct amount of tax, only 40 per cent thought that HMRC minimised the time and effort which businesses had to devote to getting their tax affairs right. In other words – the right answer is reached in the end, but it takes too long to get there.

One finding resonated strongly with us, because it reflects a concern which we have raised many times. 37 per cent of businesses reported that they thought that tax avoidance was widespread whereas only 20 per cent said the same about tax evasion. Yet all of the evidence, including HMRC’s own tax gap figures, shows that the tax lost to avoidance is much smaller - £1.7bn for avoidance whereas evasion in all its forms accounts for £13.8bn. So, the perception of businesses is significantly out of line with reality.

Does it matter? I think it does. I’ve no problem in HMRC increasing the rhetoric about avoidance, but it does perhaps lead to the view that it is more of a problem than it is, and in particular that somehow evasion is not as ‘bad’ as avoidance. It would be very dangerous from a public policy point of view for the public to believe that evasion is not something which is to be taken seriously. Alarmingly in this latest survey businesses were asked about the acceptability of tax evasion. While 92 per cent said it was never acceptable 6 per cent of respondents said that it was acceptable in some circumstances. The other 2 per cent didn’t know what to answer, which is almost as worrying.

We have consistently supported HMRC’s efforts to clamp down on tax evasion; the snapshot presented in this report suggests that there is further work still to be done.

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