HM Revenue & Customs: compliance and enforcement programme, eighty-seventh report of session 2010-12, report, together with formal minutes, oral and written evidence

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HMRC estimates that the tax gap - the difference between taxes due and the amount actually collected - stood at 35 billion (7.9% of tax due) in 2009-10, although other estimates suggest the figure is much greater. The Compliance and Enforcement Programme brought in 4.32 billion of tax revenue over the five years to 2010-11and is expected to generate a further 8.87 billion by 2014-15. However, in shedding more than 3,300 staff, the Department lost 1.1 billion in potential tax revenue: about 10 in tax lost for every 1 in running costs saved. The Committee is also not confident that the Department is sufficiently clear about the marginal rate of return it could achieve from different levels of spending. In order to live within funding limits, the Department had to defer the introduction of new systems or reduce their scope. In particular, by delaying implementation of its new Caseflow and Spectrum systems, the Department reduced the expected additional tax revenue of 743 million by 2010-11 to 547 million by 2014-15. In this Spending Review period 917 million has been allocated to further activities to tackle tax evasion and avoidance, and to collect more debt. This investment is more than double the money spent on the Programme over the last five years, and is expected to generate an additional 7 billion a year by 2014-15. It is therefore essential that the Department learns and applies lessons learnt. There was also alarm at reports that the Department had advised that the use of managed service companies to avoid tax could ever be appropriate for full-time employees of public bodies

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