By Daniel Hunter
Council leaders have urged the Government to urgently set out a clear plan of action for recouping billions of pounds lost in unpaid tax.
It comes as new analysis shows that that the public purse would be more than £20 billion per year better off if Government was able to match the tax collection rates achieved by councils.
Council leaders are now calling for Government to give a commitment to at least halving the uncollected tax deficit by the end of this Parliament.
Tax which goes uncollected by HM Revenue and Customs' is costing the equivalent of £1,370 for every household in England and Wales
Government's own figures show it is missing out on 6.75 per cent of the tax it should be collecting every year.
By comparison, local authorities last year collected 97.5 per cent of the council tax and business rates they were due to receive in—year, with the majority of the remainder to be recouped in following years. Councils are responsible for collecting council tax from more than 22 million homes and business rates from more than 1.8 million businesses.
Analysis by the Local Government Association shows that if Government was able to increase tax collection rates to 97.5 per cent, the rate local authorities have managed, the Exchequer would bring in an extra £20.145 billion per year. That would be enough to cover Government funding for the police more than two times over.
Council leaders are warning that, despite recent Government efforts to tackle tax evasion and avoidance, it is not fair that efficiently run local services continue to pick up the bill of those who evade and avoid their tax liability.
It comes just days after the LGA revealed that small print in the Chancellor's spending round announcement means that cuts to local services in 2015 will be £1 billion deeper than originally thought.
The breakdown of tax Government has failed to collect is as follows:
- Tax evasion — £14 billion
- Tax avoidance — £5 billion
- Non-payment — £4 billion
- Errors — £2 billion
- Failure to take reasonable care — £3 billion
- Legal interpretation — £4 billion
Total: £32 billion
"If central government's collection rates were as good as those of councils, the public purse would be more than £20 billion better off. That's almost double the size of the total spending cuts announced in the Chancellor's Spending Round," Cllr Sharon Taylor, Chair of the LGA's Finance Panel, said.
"When the taxman's balance sheet falls short, it takes a toll on public services across the board.
"Local government is the most efficient part of the public sector. Council tax has one of the highest collection rates of any tax. We cannot afford for local services like road maintenance, libraries and social care to continue paying the price of those who evade and avoid their tax liability. We all need Government to do better in tacking this.
"Local authorities collect council tax from more than 22 million homes. If councils can obtain more than 97 per cent of this, it is reasonable that Whitehall should be able to match this.
"Government has made positive noises on tackling unpaid tax. We now want to see a clear timetable which sets out how Government will significantly improve their tax collection record."
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