United Kingdom: Technical Assistance Report—Assessment of HMRC’s Tax Gap Analysis

IMF Staff Country Reports, October 22, 2013

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This Technical Assistance Report assesses HMRC’s (Her Majesty’s Revenue and Customs) Tax Gap Analysis program in United Kingdom and provides advice and guidance on further improving it.
The HMRC’s tax gap analysis program is described as comprehensive in tax coverage, and effectively addresses its multiple dimensions.
The report raises areas of possible further research to strengthen the program.

The program is comprehensive in tax coverage.
The program effectively addresses multiple dimensions of the tax gap.
The report identifies opportunities to further improve models, dissemination, and use of results.

Models and methodologies employed:
- Assessment of the estimation framework and estimation methodology.
- Review of specific gap models referenced in keywords: Gap model, RA-gap VAT Gap model, VAT Gap model, ISCR.
Approach to disseminating the results:
- Evaluation of how HMRC communicates tax gap results and aggregate tax gap number.
Use of results in policy and administration:
- Use of results in supporting compliance activities.
- Use of results in evaluating tax revenue performance across taxes and the effectiveness of HMRC.
- Consideration of the policy gap and measurement process for Income and capital gains taxes, income tax, and Consumption taxes.

Improve and refine models and methodologies used to estimate tax gaps.
Enhance dissemination approaches to increase clarity and utility of published results.
Strengthen the linkage between tax gap results and HMRC compliance strategies and performance evaluation.
Pursue targeted further research on aspects of the measurement process, model robustness, and the interpretation of aggregate tax gap numbers.