Tax Fraud At Highest Level Since Start Of Crisis

[interestrateripoff]

http://www.telegraph.co.uk/finance/financial-crime/9783979/Tax-fraud-at-highest-level-since-start-of-crisis.html

The size of the so-called “VAT gap” due to fraud, the difference between the amount of tax HMRC expects to receive and what it actually collects, is reckoned to have reached £3.3bn, or enough to fund a 1p reduction in the tax of every UK taxpayer.

VAT evasion has become one of the biggest costs to the exchequer and is largely due to HMRC being “significantly under-resourced”, according to BDO’s 'FraudTrack’ report.

It is estimated that about half of the fraud is down to professional fraudsters, while the rest is the result of general non-compliance and deliberate evasion by legitimate businesses.

Avoiding tax could be the difference between staying in business and going out of it, plus when you have big multinationals avoiding taxes why should people play by the rules.

[BNS]

Gerald Clelente nailed this one.

He said at some point individuals see that those who are supposed to set an example to us are corrupt, and the ordinary man on the street thinks, well if he can be corrupt and get away with it, why should I play by those rules which they are unbound by?

At which they too avoid/dodge taxes.

Or go on tax strike.Government suppression funds dry up. So the government puts taxes up which causes government suppression funds to dry up even more.

Wifey is closing down her shop. Lucky for her the lease is up for renewal in February (with a serious rent increase). Thats the last chunk of corporation tax, VAT, business rates and the government will see from her for quite some time. Though I'm not too sure she'll be happy working for somebody else in the job she's got lined up.

[montesquieu]

http://www.telegraph.co.uk/finance/financial-crime/9783979/Tax-fraud-at-highest-level-since-start-of-crisis.html

Avoiding tax could be the difference between staying in business and going out of it, plus when you have big multinationals avoiding taxes why should people play by the rules.

Sister works for HMRC. Numbers have been slaughtered progressively starting in the Broon as chancellor era. She used to work in complicance, compliance officer numbers were slashed she now works in Tax Credits, the only growth area of this sorry mess.

Combination of venal, ignorant politicians and useless senior civil servants has us heading the way of Greece and Italy where the tax take is a fraction of what it ought to be.

[byron78]

Whacking VAT up to 20% wasn't very bright.

[koala_bear]

http://www.telegraph...-of-crisis.html

Avoiding tax could be the difference between staying in business and going out of it, plus when you have big multinationals avoiding taxes why should people play by the rules.

Probably includes plenty of firms going bust while not having paid the VAT bill (i.e. comet with nearly £30m outstanding VAT and PAYE owing).

Comet is effectively 0.6% of total.

[fluffy666]

Sister works for HMRC. Numbers have been slaughtered progressively starting in the Broon as chancellor era. She used to work in complicance, compliance officer numbers were slashed she now works in Tax Credits, the only growth area of this sorry mess.

Combination of venal, ignorant politicians and useless senior civil servants has us heading the way of Greece and Italy where the tax take is a fraction of what it ought to be.

Slashing HMRC numbers has got to be THE most expensive way of saving money* ever devised...

Cutting numbers of tax inspectors has a double-whammy; not only do you lose revenue from inspections, you lose revenue from people who fear inspections..

*From a government revenues POV, of course. There is probably a 'Laffer-curve' style relationship between 'Number of inspectors' and 'Net Revenue', but we are very much on the left hand side of the curve..

[RufflesTheGuineaPig]

Slashing HMRC numbers has got to be THE most expensive way of saving money* ever devised...

Cutting numbers of tax inspectors has a double-whammy; not only do you lose revenue from inspections, you lose revenue from people who fear inspections..

*From a government revenues POV, of course. There is probably a 'Laffer-curve' style relationship between 'Number of inspectors' and 'Net Revenue', but we are very much on the left hand side of the curve..

You could have 100x the number of tax inspectors and still be financially better off for each one added.

They don't, on the scale of things, need to collect very much in tax to cover their wages.

[Gone baby gone]

They don't, on the scale of things, need to collect very much in tax to cover their wages.

It's covering their pensions that worries me...

[winkie]

Gerald Clelente nailed this one.

He said at some point individuals see that those who are supposed to set an example to us are corrupt, and the ordinary man on the street thinks, well if he can be corrupt and get away with it, why should I play by those rules which they are unbound by?

At which they too avoid/dodge taxes.

Or go on tax strike.Government suppression funds dry up. So the government puts taxes up which causes government suppression funds to dry up even more.

Wifey is closing down her shop. Lucky for her the lease is up for renewal in February (with a serious rent increase). Thats the last chunk of corporation tax, VAT, business rates and the government will see from her for quite some time. Though I'm not too sure she'll be happy working for somebody else in the job she's got lined up.

Speaking to someone last week, they have had a small shop in town for many years, they said they will not be renewing the lease when it runs out.

[HPC001]

Who didn't see this coming? Increasing taxes in the middle of a depression is utter lunacy, and I don't blame the people struggling to get by for avoiding them. VAT is not means-tested, neither is the local business rate charged by councils.

[marlint]

Who didn't see this coming? Increasing taxes in the middle of a depression is utter lunacy, and I don't blame the people struggling to get by for avoiding them. VAT is not means-tested, neither is the local business rate charged by councils.

VAT may also not be means tested- but you can reclaim it on inputs, so if you're making lots of money you pay more than if you're barely breaking even.

[EUBanana]

Gerald Clelente nailed this one.

He said at some point individuals see that those who are supposed to set an example to us are corrupt, and the ordinary man on the street thinks, well if he can be corrupt and get away with it, why should I play by those rules which they are unbound by?

At which they too avoid/dodge taxes.

Or go on tax strike.

Pretty much. If I could evade tax I would, unfortunately I'm PAYE so not much chance of that.

I certainly don't feel indignant about the other commoners who do do it though. If a plumber wants cash in hand, fine by me.

[HPC001]

VAT may also not be means tested- but you can reclaim it on inputs, so if you're making lots of money you pay more than if you're barely breaking even.

I do realise that, my VAT comment was more directed at consumers (and thus indirectly, businesses seeing lower sales). If you want a better example RE: business, how about fuel duty.

[billybong]

VAT evasion has become one of the biggest costs to the exchequer and is largely due to HMRC being “significantly under-resourced”, according to BDO’s 'FraudTrack’ report.

It's peanuts compared to the bank bailouts.

It is estimated that about half of the fraud is down to professional fraudsters, while the rest is the result of general non-compliance and deliberate evasion by legitimate businesses.

If it's not Libor fraud it's something else.

[Gone baby gone]

Gerald Clelente nailed this one.

He said at some point individuals see that those who are supposed to set an example to us are corrupt, and the ordinary man on the street thinks, well if he can be corrupt and get away with it, why should I play by those rules which they are unbound by?

At which they too avoid/dodge taxes.

Or go on tax strike.Government suppression funds dry up. So the government puts taxes up which causes government suppression funds to dry up even more.

Wifey is closing down her shop. Lucky for her the lease is up for renewal in February (with a serious rent increase). Thats the last chunk of corporation tax, VAT, business rates and the government will see from her for quite some time. Though I'm not too sure she'll be happy working for somebody else in the job she's got lined up.

You don't even have to go on tax strike - as I raised on today's thread about childcare "tax breaks" in some circumstances you can quickly get to the point where working doesn't make sense, the marginal tax rate is too high. If you are then having to compete with other participants who are subject to the same taxes, there is no motivation to (i) work or (ii) pay tax.

[Surrey Girl]

I'm not altogether convinced that the government has any intention of looking too hard at this sort of stuff.

I think that as far as they are concerned, failing to collect revenues simply put more money into the private economy.

They will take action in order to avoid looking foolish or encouraging people to avoid or even worse evade tax... a few people will have to serve some time I guess... but on the whole, if you are tunring over less than a few million quid, they aren't really very interested just at the moment.

And that is why they have reduced the number of inspectors.

If they wanted to actually get the tax which is owed, it would cost them very little, proportionally speaking, but the actual result would be a reduction in the amount of money flowing through the economy at large thereby squeezing real world liquidity and productivity and ultimately resulting in reduced revenues.

Of course they can't actually say that... they have to talk tough... but they really, really don't want to do anything about it unless they absolutely have to.

I reckon that they will deal with it once they can genuinely see "green shoots"... until then it is the lesser of two evils.

[ParticleMan]

And well and away the biggest fraudsters of the lot?

Public sector net borrowing, 1993/1994 to 2011/12

It's your pension, innit.

(there's one thing and one thing only this benighted isle cares about, and that is supporting the price of its Gilt; those merrily on high presently spooging away the stock would do as well to take as much heed of this as those they in turn castigate for dodging the flow...)

[deflation]

Ages since it was called public sector net borrowing. Didn't it used to have 'requirement' at the end?

It's "budget deficit" now. Get with the program. Can't have the public realising it's the public sector that's the huge consumer.

[SNACR]

Doesn't really explain what it means. They seem to be conflating all types of things and a big problem is calling different problems the same thing.

As far as I was aware the biggest (basically criminals running off with tens-hundreds of millions of public money) losses used to be to carousel/missing trader fraud. This wasn't really fraud as such but just outright theft. HMRC stupidly paid out huge amounts to those making the bogus claims.

Then you've got the deliberate cash-in-hand tradesman black economy. Which deprives legitimate businesses of sales revenue but, what's debatable is how much of that business would actually have occurred at a retail price that would be at least 30% higher as they're probably not going to be paying income tax either.

The other inevitable group will be those that are struggling in recession and lapsed into cooking the books to get by. The official line is this is a grave crime and they should put the business into some sort of insolvency procedure in order to stop incurring additional debt to the public revenue - which supposedly another healthy business could be passing on in theory. However, they must surely know there's zero chance of many people that have been running businesses for years putting a load of loyal employees on the dole and walking away without bending the rules a little trying to get through a recession. Ultimately, despite the official line I think it's virtually deliberate slack built into the system. These days all vat registered businesses could issue invoices through an online portal and the money be paid to or from the revenue immediately.

The other reason the income from vat is down can just be the obvious one that it's a recession and they're not cooking the books. A lot of vat is claimed back in a lot of businesses and the three big things that really determine how much vat you don't claim back and handover are staff wages, business rates and how much profit/personal drawings are taken out of the business. If you're struggling to get by and have cut staff, down-sized premises and are just about breaking even you'll hardly hand over any vat each quarter without it being any kind of fraud.

[BNS]

The other reason the income from vat is down can just be the obvious one that it's a recession and they're not cooking the books. A lot of vat is claimed back in a lot of businesses and the three big things that really determine how much vat you don't claim back and handover are staff wages, business rates and how much profit/personal drawings are taken out of the business. If you're struggling to get by and have cut staff, down-sized premises and are just about breaking even you'll hardly hand over any vat each quarter without it being any kind of fraud.

Don't be giving HMRC ideas, imagine that VAT on wages, business rates and drawings.

HMRC would love that, and civil service land they'd draw a straight line on a graph stating a linear correlation to these extra taxes and extra revenue. But of course civil service land doesn't understand that tax take isn't linear.

But somebody's got to pay for their trilllion £ pensions right?

[geezer466]

VAT may also not be means tested- but you can reclaim it on inputs, so if you're making lots of money you pay more than if you're barely breaking even.

Small businesses and sole traders who turn over <£73,000 I think it was this year, do not need to register for VAT. Of course they can if the want but it is discretionary.

The downside of claiming back the inputs is you have to whack 20% (VAT to the exchequer) on to your prices. In many cases this is the difference between a small business being competitive with a larger rival.

In the case of cafe's and other small food type shops is the output tax (that which you can claim back) is reduced due to these types of product being zero rated.

[BNS]

In the case of cafe's and other small food type shops is the output tax (that which you can claim back) is reduced due to these types of product being zero rated.

Only cold food over a counter is zero rated.

So a sandwich shop will not have to charge VAT on sandwiches.

Heat it up, and its VATable.

Cans of drink? Luxuries = VATable.

Those chocolate bars and cookies they keep in nice racks next to the till? Luxuries and therefore VATable.

You put certain items in plastic packaging? It becomes VATable.

Plastic cultery? VATable.

You deliver? VATable.

You don't have a counter (restuarants and buffet)? VAtable.

[Bloo Loo]

Slashing HMRC numbers has got to be THE most expensive way of saving money* ever devised...

Cutting numbers of tax inspectors has a double-whammy; not only do you lose revenue from inspections, you lose revenue from people who fear inspections..

Thats what we need...more fear.

fear of Government, fear of housing costs, fear of making a mistake.

[Greg Bowman]

VAT may also not be means tested- but you can reclaim it on inputs, so if you're making lots of money you pay more than if you're barely breaking even.

You don't pay 'more' you hand a bigger lump of the 20% you collected on HMRC's behalf.

Never that bright playing with VAT it's not your money and they view it like that

I suspect the shortfall is companies going bust or stopping trading as many have stated not avoidance