Making sense of the cost of tax avoidance

The art of estimating the scale of tax avoidance involves tentative extrapolations careful assumptions and caveats. The data available is patchy calculations are educated guestimates and studies must first deal with the problem that the term ‘avoidance’ itself means different things to different people.

 

 

Perhaps the most well known estimate in the UK is HMRC’s tax gap. HMRC defines avoidance as ‘bending the rules of the tax system to gain a tax advantage that Parliament never intended ... It involves operating within the letter – but not the spirit – of the law.’ What this means in practice is that the avoidance tax gap measures ‘tax under consideration’ which isn’t successfully collected. The assessment is based on a...