£5.5bn lost to tax evasion could be significant underestimate, PAC warns

The true cost of tax evasion is likely being vastly underestimated as loopholes in the current system make it all too easy for fraudulent behaviour to go unchecked according to a Public Accounts Committee (PAC) report published this week.

HMRC estimate that tax evasion cost £5.5bn in lost revenue in 2022/23 81% of which could be attributed to small businesses. However the introduction of legislation in 2021 making online marketplaces liable for VAT from overseas sellers led to £1.5bn in additional taxes per year five times greater than HMRC predicted. The PAC is therefore concerned HMRC may have underestimated the level of evasion occurring and is calling on HMRC to assess the reasons behind this gap. The PAC is also concerned by the apparent lack of curiosity shown by HMRC to investigate the issue further noting that its inquiry heard that anywhere between 5% and...