The Chancellor’s decision to cut HMRC’s (Her Majesty’s Revenue and Customs) budget is counter intuitive, will do more harm than good to the UK economy in the long term and should be urgently reconsidered, ACCA (the Association of Chartered Certified Accountants) has warned today.
Chas Roy-Chowdhury, ACCA head of taxation said: 'The deficit is clearly a huge challenge facing the government and we know there needs to be cuts to public spending but you have to careful about where you cut. Last October it was reported that the UK tax gap may be as wide as £32bn. The size of this figure begs the question – how is HMRC going to narrow this gap when the government is cutting their resources?
'If HMRC could make serious inroads into narrowing the tax gap we would all be better off. We do not expect HMRC to have an unlimited budget, but we would expect the Chancellor to realise that cutting its budget reduces its ability to collect taxes. The Chancellor has said that austerity will last beyond this parliament so he is clearly looking at the long-term health of the economy and he needs to take the same view with tax collection. He needs to find extra resources for HMRC now for them to play their part in the long-term aim of reducing the budget deficit. With tax collection we need to 'spend to save' that is to ensure we close the tax gap efficiently and effectively.'
HMRC estimates the tax gap at £32bn, although some believe it to be more. This estimate is made up from tax owed from behaviours such as avoidance, evasion, the hidden economy and non-payment.
Visit the 'related links' section, left of this article, for more details of how HMRC calculate this figure.