Tax Gap Drops in the UK

October 17, 2014 Taxation in UK

LONDON – Tax compliance is improving in the UK, although a significant portion of taxes are still outstanding due to tobacco smuggling and evasion of VAT.

The difference in the amount of tax revenues collected in the UK and the amount of taxes actually collected in the UK between 2012 and 2013 is approximately GBP 34 billion, an amount equivalent to 6.8 percent of total tax liabilities, according to new information released by the HM Revenue and Customs on October 16th.

According to Financial Secretary to the Treasury David Gauke said that at the current levels, the UK has one of the lowest tax gaps in the world, and the government’s active measures to lower tax evasion and to raise tax compliance has proven to be effective.

The current level of the gap of 6.8 percent, is significantly lower than in 2005 when the tax gap reached approximately 8.5 percent, and the increased rate of payment has yielded as much as GBP 43 billion in tax revenues in the years between 2005 and 2013.

The experts of the HMRC specifically noted that the most significant contributors to the tax gap in 2012 was largely due to uncollectable taxes from liquidated companies, VAT evasion, and losses in revenues from the trade of illicit tobacco.

Photo By: Images Money