Regular readers will be aware we have followed the massive losses to the HMRC of VAT due to Missing Trader Fraud (MTIC).
This was running at an "estimated" £400 Mn a month (that's £4 Billion a year) for several years.
This is the last mention by Alastair of this black hole in his 2007 Pre-Budget report October 2007
At Page 98 we have ....
5.104 New estimates of Missing Trader Intra Community (MTIC) fraud, published today,show that the scale of attempted fraud fell by up to £1.5 Bn.in 2006-07, to between £2.25 Bn. and £3.25 Bn. The estimated impact on VAT receipts fell to between £1 Bn. and £2 Bn. These reduced estimates demonstrate the success of the Government’s strategy for tackling MTIC fraud. HMRC will take further steps to apply both criminal and civil sanctions to those who are found to be knowingly involved in fraudulent trading.But does add .Changes in trade associated with VAT MTIC fraud mean that comparisons of volume and prices (both including and excluding trade associated with VAT MTIC fraud) should be treated with a great deal of caution.
To this you can add as detailed by Mr Murphy of Tax Research at the date of that PBR ...
- 14.2% of VAT is not collected. Current cost (my estimate based on HMRC data) - £13.24 billion
- £400 million of duty on spirits is not collected
- 13% of cigarettes are smuggled - cost £1.65 billion
- 56% of hand rolled tobacco is black market - cost £750 million
- £350 million of diesel duty is evaded in the UK
- 43% of all diesel duty is evaded in Northern Ireland (people cross the border) - cost £210 million
To which he adds .
- 13% of tax due by those subject to self assessment is lost
- 1.2% of PAYE and NI due on small and medium sized payrolls is lost
- About 14% of tax due by small and medium sized companies is lost.
The losses on that lot come to £5 billion - but their data is up to 5 years out of date - amazingly.
I’ve reflected on this data. Extrapolating the average tax lost on direct taxes and those taxes that probably behave like them and applying this to 2007/08 HMRC data then total direct tax losses might be £17.6 billion, VAT might be £13.2 billion and other indirect taxes £4.8 billion - a loss of £35.6 billion.
No wonder when it cam to calculating expected tax take darlin Alastair kept quiet.
.... remember, of the £Billions lost in MITC a mere few million have been recovered, although a few people are cooling their heels at HM pleasure.