City Research Online

The Tax Gap. Tax Evasion in 2014 - and what can be done about it

Murphy, R. (2014). The Tax Gap. Tax Evasion in 2014 - and what can be done about it. London: Public and Commercial Services Union.


This report investigates the scale of the UK tax gap, and tax evasion in particular, in the UK and what can be done about it. The report suggests that the UK‟s tax gap may now be £122 billion a year. This is an increase from 2010 when PCS last commissioned Richard Murphy to estimate the tax gap. It was estimated at that time, that the loss each year was £95 billion with £25 billion of tax being owed at any time. It is now estimated that the annual loss has increased to a total of £122 billion a year. The tax gap matters because at £122 billion a year the tax gap is only a little less than the annual budget for the NHS. It is also big enough to cover the entire UK education budget with more than £20 billion left over. That should make this issue one of the highest priorities on any politician‟s agenda. The troubling fact is that this does not appear to be the case at present. The tax gap is the difference between the amount of tax that should be paid in the UK and the amount of tax that is actually paid. It is made up of tax avoided and evaded and of uncollected tax that is known to be owed but is either never paid or is paid late. This report estimates that tax evasion might cost the UK £85 billion a year whilst tax avoidance might impose a cost of £19 billion a year and tax not paid could result in a loss of income of £18 billion a year. In a time when all major UK political parties seem committed to austerity measures the size of the tax gap is a key variable in the equation that determines economic and social policy. Put very simply, if the tax gap is small the government has more to spend. If it is big then governments think they must make choices about how to deal with budget deficits and we have seen in recent years that it is public services and ordinary people that suffer as a result of such decisions. The consequence is that for the very many people in the UK who are either dependent on the government for all or part of their income, or who are dependent upon government services, such as the NHS, for their well-being, the size of the tax gap can have a direct impact on the quality of their lives. PCS first made this important point in 2010 when we were the first organisation to publish an estimate for tax evaded in the UK apart from HMRC. That report was ground breaking when it was published. In 2010 HMRC admitted the whole tax gap was £42 billioni (a figure they have steadily revised down since then to £35 billion in 2013ii). In contrast what the report commissioned from Richard Murphy showed was that the amount of tax HMRC were not recovering - because their political masters were not giving them the resources required to do so - was vastly bigger than HMRC admitted. What this new report shows is that things have, if anything, got worse in the Tax evasion in 2014 meantime whilst HMRC has been starved of ever more resources over the intervening years, costing thousands of PCS members their jobs whilst decimating the valuable service they supplied to the UK public. Since 2008 PCS and its members have been at the forefront of the tax justice campaign in the UK. We have done that in an attempt to preserve our members‟ jobs and to protect the services they supply. We have also done so to show that if only the tax gap was properly tackled we would have a very different economic outlook in the UK. The budget deficit, trumpeted as the need for austerity measures, cuts to services, pay freezes and attacks on those in receipt of social security payments, would not be closed as a result of merely collecting the tax evaded in the UK economy but a large amount of money that could be invested in good quality public services would be “recovered” by the Treasury. PCS has argued consistently since 2010 that there is no need for the austerity measures now crippling the UK economy and which are depriving so many of jobs, opportunity and hope as well as causing cuts in health and education. Our argument is as ideological as - but on the opposite side to - the government‟s and is that the tax gap is a crucial factor that should be at the centre of economic debate in the UK and which could transform our economic prospects if only it was properly addressed. Richard Murphy, who wrote the attached report, also looks at the impact of staffing cuts in HMRC on the tax gap. In 2005 HMRC had 92,000 staff. By 2016 it is expected to have around 52,000. Across the UK HMRC has abandoned its local office structure and its face-to-face contact with the local communities it serves. Local knowledge has been lost and trust has been foregone as a result. In its place we now have call centres whose staff, through no fault of their own, have not had sufficient training for the jobs they are being asked to do whilst tax investigators now have one hand tied behinds their back at all times by the constraints placed upon them by a lack of resources. It is no wonder that the tax gap remains a persistent problem. There is as a consequence a desperate need to invest in HMRC if the tax gap is to be tackled. Tackling that tax gap is vital if public services are to be preserved and if the UK is to get back to work. It is also important if the government is to support honest businesses and honest taxpayers and uphold the rule of law. This is an issue which in the run up to the 2015 General Election really needs to be in the voting public‟s mind. Think about it when people ask for your vote and remember when doing so that we are all enriched by good public services.

Publication Type: Report
Additional Information: © 2014 Public and Commercial Services Union. Any part of this report may be reproduced or quoted without the permission of the publisher or author subject to the condition that reproduction is not made in a publication produced for profit and the source is acknowledged. Permission for extracts of more than 100 words is required in any other case.
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Policy & Global Affairs > International Politics
Related URLs:
Text - Published Version
Download (1MB) | Preview
Official URL:



Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login