Photographer: Jason Alden/Bloomberg

U.K. Loses $24 Billion a Year to Tax Fraud, Watchdog Says

  • Small companies, criminals pose the biggest tax-fraud risks
  • Report first in series looking at how HMRC tackles tax fraud

The U.K. loses 16 billion pounds ($24 billion) a year to tax fraud, almost half of the amount of potential revenue that goes uncollected, the National Audit Office estimated.

Smaller businesses and criminals are responsible for 17 of the 21 biggest “tax-fraud risks,” with eight relating to organized crime and nine involving medium-sized, small or micro-businesses, the government spending watchdog said in a report published on Friday. It cited the example of a small business failing to register for value-added tax, a levy on sales, as one such risk.

Her Majesty’s Revenue & Customs “clearly needs to think harder about how it tackles tax evasion, the hidden economy and criminal attacks,” said Meg Hillier, chair of the Public Accounts  Committee, the parliamentary panel that scrutinizes NAO reports. “HMRC needs to use the powers and sanctions it has to make a public example of those who break the rules."

The NAO said reducing tax fraud was a “high priority" for the U.K. tax authority and called for better use of its data and analysis. Thursday’s report is the first in a series examining how HMRC tackles tax fraud.

"Reducing these losses is not straightforward," said Amyas Morse, head of the NAO. "We will be looking for further improvements in the way HMRC uses data and analysis to understand the effect of its actions in both the long and short-term."

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