Tax gap set to widen, influential MPs to be warned

Embargoed until 16:00 Wednesday 19 January 2011

A committee of senior MPs will be warned on Wednesday by senior tax officials to expect an upsurge in tax avoidance and a widening tax gap if planned cuts to tax collection budgets go ahead.

The Association of Revenue and Customs (ARC), the union representing senior managers in HM Revenue & Customs (HMRC), will tell the Treasury Sub-Committee that proposed budget reductions could undermine HMRC's ability to identify, prioritise and deal with those avoiding paying tax.

HMRC has already suffered significant staffing reductions, from 99,179 staff in 2004-05 to 68,037 in June 2010. The Spending Review announcement of a further 15% cut in expenditure will further erode staff capacity, and their ability to close the tax gap.

Graham Black, ARC President, will say:

"It is no coincidence that total revenues are falling at a time when HMRC has suffered significant staffing reductions.

"HMRC is made up of world-class tax professionals and the Government must realise that we need to invest in HMRC and our staff, to claw back the money that should be helping to beat the deficit."

The Government has pledged to invest £900 million in extra tax-gathering resources for HMRC. However, this is not additional money, but is recycled from savings made elsewhere in HMRC and will do little to offset the damage of overall budget cuts and reduced staff numbers.

Terry Cook, former ARC President, will also tell the Committee:

"HMRC generates income for the Government, and must be treated differently to other government spending departments. Cutting tax-gathering budgets will not save money; it will cost money. Tax avoidance will increase; revenues will diminish."

The latest estimate of the gross tax gap for 2008-09 shows that it has increased by £4 billion compared with the previous year, and stands at approximately £52 billion. ARC believes that if £2bn of the estimated tax gap were to be recovered, it would provide valuable extra resources - for schools, hospitals and other public services.

Notes to Editors

Graham Black, ARC President, is available for interview.

1. For further information please contact:

  • Graham Black, ARC President, on 020 7401 5555 or 07766 497976.
  • Sarah Guerra, ARC national officer, on 020 7401 5555 or 07958 357546.

2. ARC is part of the FDA, and represents senior tax professionals and managers who work in HMRC. These are the senior tax inspectors, accountants, lawyers, policy makers and managers who implement the Government's policies, draft tax laws and administer the tax system fairly. ARC members are highly skilled and trained, bringing in the money to fund public services for the benefit of everyone living in the UK.

3. ARC will give evidence to the Treasury Sub-Committee on Wednesday 19 January at 2.15pm, in Committee Room 8, Palace of Westminster.

4. The meeting is part of the Treasury Sub-Committee's inquiry into the Administration and Effectiveness of HMRC.

5. Further information on this inquiry can be found at: http://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/inquiries1/sub-committee-hmrc/