The $ 39 billion tax gap in the UK has left a “financial black hole” for its already ruined economy

GettyImages 1224647135SOPA Images / Getty

  • The UK tax gap, which shows the balance between the amount of taxes expected and actually paid, fell to a five-year low of $ 39 billion in the year 2018-19, official data showed.
  • The UK revenue department raised a total of £ 628 billion ($ 794 billion) in that year, equivalent to approximately 95% of the taxes expected by the authorities.
  • But any impact of the Covid-19 epidemic on the tax gap will likely be visible only in 2020-21.
  • Adding to the economy’s woes, “a £ 31 billion financial black hole remains tempting by all standards,” said a senior analyst at AJ Bell.
  • Visit the Business Insider homepage for more stories.

The gap between the amount of tax expected and what was actually collected by the UK’s revenue and customs department was £ 31 billion ($ 39 billion) for the year 2018-2019.

While it looks like a huge number, it’s actually a minimum of 15 years in percentage terms, according to a report released Thursday by Her Majesty’s Revenue and Customs, the government department responsible for taxes in the UK.

The tax gap is surprisingly equal to the amount spent on relief measures to stem an economic recession from the coronavirus pandemic so far.

The estimate represents 4.7% of UK tax liabilities, which means that the HMRC collected 94.3% of all taxes due between 2018 and 2019. In the previous year it was around 5%.

A gap can result from several reasons such as errors in taxpayers’ simple calculation, legal interpretation, evasion, circumvention and criminal attacks on the tax system.

“It is impossible to collect every penny of tax owed – for example, we cannot collect outstanding taxes from businesses that become insolvent,” the department said in a statement.

Although the UK has secured the lowest tax gap recorded in percentage terms since comparable data started in 2005, it is still a major cause for concern due to the country’s serious current economic state.

Read more: The most accurate analyst covering e-commerce claims that these 7 stocks will be among the biggest winners of the move to online shopping

The gross domestic product of the United Kingdom has declined in over 40 years due to the pandemic and has fallen by 20% in a single month.

In addition to the troubles of the economy, “a £ 31 billion financial black hole remains tempting by all standards,” said Tom Selby, senior analyst at AJ Bell, in a statement.

Selby stressed that the missing money equates to the entire budget of the transport departments and corporate, energy and industrial strategy (BEIS) and that the tension of the pandemic on public finances would add more pressure to bridge the fiscal gap in the coming years.

“These efforts will likely focus on people who break or bend the rules to artificially reduce the amount of taxes they pay,” he said.

“However, simplification of the rules that individuals are expected to follow and efforts to further modernize the reporting system could also help reduce tax errors.”

Read more: GOLDMAN SACHS: Wall Street is preparing for a historically wild stock market as the presidential election approaches. Here is an amazing but simple strategy to protect your wallet, regardless of the outcome.

.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.