By Richard Murphy
Adviser to the Tax Justice Network and the TUC on taxation and economic issues. He is also the director of Tax Research LLP.
The ‘tax gap’ has three major components:
- Tax lost to tax avoidance, which is defined here as seeking to minimise a tax bill without deliberate deception (which would be tax evasion or fraud) but contrary to the spirit of the law;
- Tax lost to tax evasion, which is the illegal non-payment or under-payment of taxes, usually by making a false declaration or no declaration to tax authorities, resulting in legal penalties if the perpetrator is caught. Tax evasion includes fraud, error and neglect by the taxpayer;
- Non or late payment of tax declared to be due but not paid on time, i.e. late payments and bad debts suffered by HMRC.