Sunday, July 4, 2010

What is worse? To be a tax cheat or a benefit cheat?

Three issues conspired to prompt this post.

The first was a few months back when I was working from home. It seemed that commercial radio was full of adverts encouraging tax credit claimants to notify HMRC whenever their circumstances changed. In effect to voluntarily admit they their tax credits should be cut. "Some chance" I thought. These were not the equivalent of the adverts encouraging the prompt submission of tax returns, which are the only vaguely related tax advert I can recall.

Then, on last week's 'Now Show' on Radio 4, which I have already flagged on the Accountant jokes and fun blog, came reference to the different ways in which the public are encouraged to report tax evasion and 'benefit thieves'.

And finally I have just read a posting on the Tax Research blog: Benefit fraud is 624 times more serious than tax evasion. Leaving aside the admitted hyperbole in that post there is a serious point with which I would concur.

Of course there are differences between those who deliberately claim benefits to which they are not entitled and those who deliberately fail to notify their liability to pay tax or who lie on their tax returns. There is also the confusion caused by describing these tax evaders as tax avoiders. This lumps them in with otherwise law abiding taxpayers who have chosen to adopt what they are advised are strategies they can pursue to reduce their tax liabilities whilst staying within the letter of the law. (I'm no fan of such schemes but the taxpayers involved at least have grounds for believing they are within the law).

I suspect it is far easier to identify, track, catch and prosecute benefit cheats than it is to do the same with tax cheats. Are sufficient resources allocated to the latter however? I think not and the last Government's constant reduction in manpower within HMRC makes such prosecutions even less likely. I think that's a shame as more people perceive they are getting away with their tax fraud. They tell their friends who may choose to copy them and so the level of tax fraud grows. I know our tax system is complicated and that some people get caught out by unfair tax laws. That's again quite different to the deliberate evasion of taxes. And more resources should be applied to stop it. Do you agree?


  1. Well, I've argued on my blog that the benefit cheat is obviously worse. At least the tax cheat is likely to be contributing more to the state than they take from it. The benefit cheat is a net drain on our country's finances; and in doing so they undermine public support for an essential public service for the most needy.

    The "624x" calculation isn't just hyperbole; it's completely misleading. It looks only at advertising spend, not overall enforcement. I think even the most naive observer would expect governments to supplement advertising with cool, hard enforcement.

    And are tax cheats really so hard to catch? There aren't that many of them. Being rich, they tend to live fairly ostentatious lives. And, tax information exchange agreements have made their traditional sources of evasion pretty precarious.

  2. and then you have MP's where their innocent "business but private" expenses had gone for years unchecked by HMRC and are even now even less likely to be prosecuted for their misdemeanors