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HM Revenue & Customs (HMRC) has published new figures for the “Tax Gap”, which is broadly the difference between the tax that HMRC thinks it should have assessed, and that which it has actually collected.

The definition of the “Tax Gap” is arguably more problematic than collating the figures. There is wide disagreement between various parties. But using HMRC’s figures, the Tax Gap is around £35 billion, or about 7% of the total tax estimated to be due. HMRC acknowledges that, in real terms, the Tax Gap actually widened slightly in 2011/12 against the previous year by about £1 billion, although estimated tax revenues increased by a proportionately greater amount thanks to the VAT hike – hence the percentage fall in relative terms.

One might easily infer that HMRC has a vested interest in publicising the Tax Gap, on the basis that it is HMRC that is most directly involved in closing the Gap, and positive results reflect well on HMRC. Certainly its own press release highlighted the small percentage improvement, rather than the absolute increase in the Gap. But HMRC must also realise that the public is becoming sufficiently well informe, that it recognises that the vast majority of individuals and small businesses do not contribute a significant amount to the Gap.

A dialogue has started that the Gap doesn’t recognise some of the substantial losses arguably due to international trading, because they are perfectly within the letter and spirit of the law – as the law now stands.  

I find myself wondering if this is the debate that HMRC would like people to have. Bearing in mind that the more recent changes to make the UK a more attractive place to do business appear to have been driven by the Treasury, and HMRC serves merely to implement what its masters command, it must be hard for HMRC directly to challenge those changes, even when it can see what potential lost revenue lies ahead. Perhaps we shall never know, even if the debate gains momentum and “international taxation” changes as a result. It would certainly be disappointing to find that HMRC’s efforts focus solely on making the figures look good.