Many thanks to Kerry Fairless who is the guest writer of this blog post.

Those of you who have the pleasure of one my rants will be aware of the Missing Billions. Those that haven’t read on.

The main revenue collecting method used by Government is via the taxation system. It’s a complex system based on earnings and relief. Many people (you and I) pay our tax through Pay As You Earn (PAYE). This is deducted from source by the employer who then pays HMRC what is due. For people like you and I, we pay our dues. We have no choice in the matter.

For others there are other systems such as Self Assessment (SA) where the individual is responsible for payment of tax directly to HMRC; this usually involves the use of an accountant. Of course for this group of people there is a choice about to declare, how to argue reliefs and business usage. Some make mistakes, some intentionally defraud.

Businesses of course pay different types of tax, the most obvious being Value Added Tax (VAT). Much like SA, accountants are usually required and there is a plethora of complicated legislation to follow. Again, this system involves mistakes, error and intentional avoidance.

You would think that HMRC would like everyone to be paying the right amount of tax, on time. For those that can’t pay there is a Debt Management process whereby members of DMB attempt to collect backdated, unpaid taxes and over payments of Tax Credits.

Of course, thanks to the slashing of 25000 jobs there aren’t as many of us as there used to be. And thanks to reduced budgets our computer systems aren’t as robust as they should be. This recently has resulted in mayhem of the over and under payment of PAYE where the computer system combined with the lack of staff has lead to a massive amount of errors and individuals being left with hefty bills to pay. This was avoidable if the correct number of resources had been employed and a properly tested, flexible computer system had been employed. This was something PCS negotiators told the Department 3 years ago, but as usual they believed they knew best. Maybe they should be saying “sorry” to the millions effected for not listening to us. I wont, however, hold my breath.

The Tax Gap is made up of the amount of money HMRC collects through tax compared to the amount of money HMRC could collect through tax. Present estimates have this figure as between £42bn (HMRC’s figure – which does not include £28bn in written off and uncollected debt) and £123bn (PCS’s figure based on independent research by Richard Murphy). So, whatever way you look at it, we can guarantee there is a minimum of £70bn out there that should be going to pay for public services, reducing the deficit.

This money is made up by those who…….

a. avoid pay tax by illegal methods
b. evade paying tax by making errors
c. use tax havens such as the Turks and Caicos islands

These people and businesses do not fully contribute to the running of the country, yet continue to reap the benefits of living here and using services provided by those of us who do pay our fair share in tax.

As you will no doubt know, the Chancellor announced his Comprehensive Spending Review (CSR). This will have a detrimental effect on everyone be it through services no longer being provided, reduced welfare, higher unemployment, poorer education and poorer health as billions of pounds will be cut from budgets.

There is an alternative, collect those Missing Billions.

Now for the mathematics part….

The below table is based on the PCS figure and the HMRC figure, the population estimates are taken from wikipedia. The Compliance Officer figure is taken from a Parliamentary Question tabled a couple of years that identified that everyone in Compliance makes £658k a year clear profit (ie, salaries and overheads are already taken off).

If you divide the tax gap figure by the population, you will see how much each person in the country would need to pay to clear the tax gap. By PCS estimates its £1983 and by HMRC figures it is £677. If you then multiply those figures by the population of the town (and of course this is just Southend, it doesn’t include places such as Benfleet, Rayleigh etc) you will identify how much the tax gap is locally. Take that figure and divide it by the $658k a Compliance Officer can collect and you will identify how many additional people it would take to collect that money. This of course does not include any of the processing staff or contact centre staff who would need to be employed in the back office to ensure payments are processed and queries dealt with.

So, at a time where we are facing a 15% cut in staff, we should in fact being looking at an increase of somewhere between 169 and 495 in Southend and as many as 186930 nationwide.

PCS Tax Gap Figure £123billion R&C Tax Gap Figure £42billion
population 62041708 population 62041708
per head £1983 per head £677
Southend 164300 Southend 164300
Tax Gap Southend £325.7m Tax Gap Southend £111.2m
compliance officer £658000 compliance officer £658000
additional jobs Southend 495 additional jobs Southend 169
additional jobs UK 186930 additional jobs UK 63830

Whilst the Government continue to cut jobs from HMRC, the Tax Gap will continue to grow. The entire basis of the CSR is to reduce the national deficit by cutting. The alternative is to properly invest in HMRC and collect the Missing Billions.

The Tax Justice Campaign has been running for several years now. Foreign media are very interested in it, some MPs are very interested in but the UK media does not want to publish this national scandal. Ask yourselves why. Look at who owns the national media, look where they bank, see how much tax they pay!

Write to your MP now and ask why the Missing Billions is not being collected.