Source · Select Committees · Public Accounts Committee
Recommendation 8
8
Accepted
HMRC’s 2020–21 estimates of the tax gap are more uncertain than usual due to the...
Recommendation
HMRC’s 2020–21 estimates of the tax gap are more uncertain than usual due to the impact of COVID-19 on the data it uses to inform its estimates. For example, HMRC said it has had to make some assumptions about the underlying level of write-offs and remissions that might happen. HMRC does not publish an overall range around the tax gap at the moment, and said it was quite difficult to do given the different methodologies used to calculate the tax gap for each individual component. In its reporting, HMRC comments on the confidence it has in each of these components, and sets out the sensitivity associated with any assumptions used. We asked whether HMRC was confident that the tax gap had actually stayed the same in 2020–21. HMRC said that it was confident that the 2020–21 estimate is the best possible estimate at the moment given the data available.12 6 C&AG’s report, para 1.25 7 Qq 24–29 8 Qq 13–14 9 C&AG’s report, para 5 10 Q 15 11 Q 46 12 Qq 15, 19–23; C&AG’s report, para 5 HMRC performance in 2021–22 11
Government Response Summary
HMRC will explore the feasibility of applying advanced statistical techniques to produce an overall uncertainty range for the headline tax gap figure by December 2023, and will publish a range if analytically robust.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Target implementation date: December 2023 2.4 Although HMRC has developed its capability in applying statistical techniques to calculate and publish ranges of error and fraud in the COVID-19 pandemic support schemes it may not be feasible to produce a robust uncertainty range for the headline tax gap figure. HMRC will explore the feasibility of whether these advanced statistical techniques can be applied to produce an overall uncertainty range and publish a range if it is analytically robust. 2.5 Statistics using data and modelling are subject to uncertainty and this is an inherent aspect of all tax gap estimates. The headline tax gap, the sum of 25 separate tax gap estimate methodologies, is subject to uncertainties due to the data available, how that data was collected (for example, as a result of a survey; administrative data; consumer expenditure data from the National Accounts produced by the Office for National Statistics, or a random compliance check) and the estimation method used. 2.6 The department publishes a total point estimate for the tax gap which is equal to the sum of the central estimates components and point estimates components where ranges are not produced. 2.7 The department has increased transparency on the levels of uncertainty of the estimates where this is feasible. Since ‘Measuring tax gaps 2021 edition’ an uncertainty rating for each of the tax gap components is published. These ratings range from 'very low' to 'very high’ uncertainty. For 2020-21, 71% of the tax gap estimate attained a ‘low’ or ‘medium’ uncertainty rating.