Source · Select Committees · Public Accounts Committee
Recommendation 20
20
In addition, HMRC does not publish any tax gap analysis for different types of industry.
Conclusion
In addition, HMRC does not publish any tax gap analysis for different types of industry. For example, HMRC has not published an estimated tax gap for the construction industry despite introducing the construction industry scheme to deal with high levels of non-compliance. Recommendation: HMRC should include analysis of the tax gaps for each industrial sector in its future publications of the tax gap. In its Treasury Minute response to this report, HMRC should also set out what the benefits and challenges are of doing a similar analysis about the tax gaps in the four nations of the UK.
Government Response
Not Addressed
HM Government
Not Addressed
2. 1 The government disagrees with the Committee’s recommendation. 2. 2 In Measuring tax gaps 2020 edition, the department provided tax gap estimates by tax type, taxpayer group and behaviour. As tax gap models are built to estimate the total gaps by tax type, data and modelling techniques do not allow for some forms of subgroup analysis to be achieved comprehensively – such as analysis by industry sector. 2.3 It may be possible to estimate some components of the tax gap by sector, for example for estimates based on data from the random enquiry programme. In this instance, data from multiple years would need to be pooled together to provide sufficient cases for subgroup analysis, which would mean the department could not present a time-series in this analysis. To improve precision for single-year estimates, additional resource would be needed for the random enquiry programme to increase the number of cases. This would also increase the burden on compliant customers who are selected for enquiry and would entail an opportunity cost as an equivalent number of risk-based enquiries would yield more revenue. In the absence of sufficient data, breaking down the total tax gap by industry sector would entail a high level of assumption and would result in extremely uncertain estimates that would not be in keeping with the level of precision offered by the statistics presented elsewhere in the report. 2.4 The department recognises that from time-to-time risks will emerge in specific industries, regions or tax regimes, and the department will seek to provide tax gap estimates as to the magnitude of these where it is feasible. For example, in Measuring tax gaps, the oils tax gap for Northern Ireland is disaggregated from the gap for Great Britain, which demonstrates the difference in the size of the illicit diesel market between these regions. 2.5 The department will continue to keep its tax gap estimates under review and will prioritise development where most value can be provided to users of its statistics.