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Tackling the tax gap

The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The tax gap arises for a number of reasons covering a wide range of behaviours from simple errors to evasion. According to HMRC’s analysis, the tax gap for 2017-18, the latest year for which data are available, was £35 billion (5.6% of tax liabilities).

We have covered various aspects of HMRC’s efforts to tackle the tax gap in the last few years, such as tobacco smuggling, tax fraud, online VAT fraud and taxing high net worth individuals. Our current study considers HMRC’s approach to tackling the tax gap at a strategic level, cutting across various behaviours and customer segments, to understand how HMRC identifies risks and factors that influence the tax gap, how it identifies and implements strategic responses to minimise the gap and how it assesses the cost-effectiveness of its interventions.