MPs Warn HMRC's £5.5bn Tax Evasion Estimate Vastly Understates Losses

The House of Commons Public Accounts Committee (PAC) has warned that HMRC's estimate of £5.5 billion lost to tax evasion in 2022-23 is likely a significant underestimation. The PAC criticized HMRC for being 'not sufficiently curious' about the true scale of tax evasion and called for a clear strategy to combat it, citing loopholes that make the system vulnerable to abuse. Approximately 81% of the estimated losses are attributed to small businesses, yet recent legislative changes have generated £1.5 billion in additional tax revenue, indicating that HMRC's methods of estimating evasion are flawed. The committee highlighted that between 5% and 20% of registered companies in the UK may be fraudulent, with enforcement actions against such companies remaining weak. Furthermore, HMRC has drastically reduced criminal prosecutions for tax evasion, indicating a lack of deterrence for potential violators. The PAC's report underscores the urgent need for better collaboration between HMRC and other regulatory bodies to address these ongoing issues.