Tackling tax evasion
However, tax evasion is expected to continue to make up a large proportion of the UK’s tax gap, which is the amount of tax which ought to be collectable but which never reaches the Treasury’s coffers, said Bull.
He highlights two reasons behind this – secrecy and lack of political will to tackle tax evasion.
Bull points out that tax evasion and the hidden economy “work precisely because the taxman knows nothing about them”.
“By and large, most forms of tax avoidance require the company or individual concerned to decide how the arrangements should be disclosed in the relevant accounts or tax returns.
“In other words, although there are plenty of opportunities for tax avoidance arrangements to fly beneath HMRC’s radar, there is often something to draw them to the tax inspector’s attention,” he said.
As a result, Bull believes that the HMRC is more willing to crackdown on tax avoidance compared to tax evasion as the former targets a small group of tax payers, which are unlikely to make much of a difference to electoral results.
Whereas, tackling the huge number of people involved in “low-level tax evasion” and the hidden economy “might turn affected voters against the government of the day”, argued the tax adviser.
“In other words, whether the government is Labour, Conservative or Coalition, there will be a group of people arguing that the chances of re-election are not improved if potentially huge numbers of evaders are brought to book ‘on their watch’ by HMRC,” he said.
