The government has been criticised for failing to collect £42bn in unpaid tax, as the UK economy teeters on the brink of recession. The cross-party Commons public accounts committee (PAC) described the sum as 'eye-watering' and accused tax collectors of lacking ambition to tackle fraud and error.
The PAC found that HMRC fails to collect about 5% of the tax owed each year. Meg Hillier, the Labour MP who chairs the committee, said the unpaid taxes could have filled 'this year’s infamous public spending black hole'. She added that HMRC's plan to employ more staff over the next few years is not fast enough to dent the tax gap amid huge public sector spending pressures.
HMRC collected £731.1bn in taxes in 2021-22, a record high. However, the committee said billions that could improve public services are lost through unpaid tax. The criticism comes as the government faces strike action over pay, with ministers arguing that more generous offers are unaffordable.
The PAC also highlighted a 'moral duty' for HMRC to recover money lost through fraud during the Covid pandemic. It expressed disappointment that HMRC expects to recover only around a quarter of the £4.5bn lost to fraud and error in coronavirus support schemes. A temporary taskforce with £100m is investigating 40,000 cases but is forecast to retrieve only £1.1bn, leaving over £3bn unaccounted for.
An HMRC spokesperson said the department has cut the tax gap by over 30% since 2005 and is adding 2,500 staff to compliance teams. They defended the approach to debt recovery, saying a blanket approach would put thousands of people and businesses at risk.
