'Abhorrent' 44% surge in unpaid taxes by UK's rich to £3.6billion

'Abhorrent' 44% surge in unpaid taxes by UK's rich to £3.6billion New figures from HMRC have revealed a widening £59.2billion "tax gap" while the government is having to borrow heavily more to meet its spending needs A more than 40% surge in the amount of missing taxes owed by Britain's richest people has been branded "abhorrent" by critics. Figures from HMRC show the country's wealthiest individuals failed to pay £3.6billion that was owed in the last financial year - more than the shortfall for all other individuals taxpayers combined. The so-called "tax gap" come as the government battles a black hole in the public finances. The discovery was contained in figures from the HMRC showing the overall tax shortfall among individuals and firms rose to more than £59billion in the last financial year, equating to 6.4% of all the taxes due. To put the number into perspective, the tax it lost out on was almost was much as the £60billion the government spent on defence last year. The missing money comes as the government is forced to borrow heavily - £132billion last year - because it does not have enough coming in from tax to meet its spending needs. The ever widening shortfall is one of the key challenges facing whoever replaces Sir Keir Starmer as PM, with Andy Burnham the leading frontrunner. HMRC says the reason for the gap between what it expected to collect and what it ended up getting could be a host of reasons. For individuals and companies in general, it ranges from mistakes in calculating the amount of tax owed and avoidance contrary to the rules allowed, through to tax evasion, which is illegal, and criminal attempts to defraud the tax system. The tax gap for wealthy individuals - the top 2% of taxpayers in the country - jumped from £2.5billion to £3.6billion last year. More than 70% of the wealthiest taxpayers are known to be represented by a “tax agent”. Caitlin Boswell, deputy director at Tax Justice UK, said: “It’s a massive worry that the tax gap for the wealthiest has increased over the past year, at the same time the Chancellor promised to crack down on it. So it’s even more concerning that HMRC still won’t publish the real tax gap for wealth held overseas by the richest and most powerful people in Britain. “With wealth inequality spiralling and ordinary people across the UK struggling to make ends meet, it’s abhorrent that the super-rich are dodging paying their fair share. It’s robbing the country of the investment it needs. Any incoming Prime Minister and Chancellor must recognise the size of this problem and address it head on to make the tax system fair and raise revenue that could make genuine improvements to people’s lives.” Mike Lewis, director at the group TaxWatch, said: “The untold story of this government’s economic plans is that they’ve bet the house on closing the tax gap. But today’s figures show a significantly worse picture than we saw last year. The tax gap has been rising since 2017/18, and HMRC thinks it increased by over £6billion in this government’s first year in office. “The Chancellor has promised that in just three years time it will be raising nearly £9billion extra annually thanks to measures to shrink the tax gap. Those measures are the government’s third biggest revenue-raising policy. Today’s figures show how far they still have to go.” Paul Monaghan, chief executive of the Fair Tax Foundation, branded the jump in the overall tax gap in the past year “mind-blowing”, having risen by 60% over the last five years. Small businesses account for more than 60% of all the missing money owed to the taxman. “The tired old mantra of ‘big business bad, small business good’ has never looked more infantile,” Mr Monaghan said. “There are good and bad actors in businesses of all sizes. This large and growing small business tax gap is the culmination of whole series of small business tax scandals, everything from pheonixing on the high-street, through to disguised remuneration and fraudulent R&D claims. Robust action is needed, if only to allow diligent law-abiding small business to have a fair chance to compete.