Labour party publishes plan to close the tax gap

The Labour party has published their plan to close the tax gap – the gap between tax owed and tax paid – which is estimated at £36 billion.

The plan broadly proposes to do this by boosting tax compliance. Labour plan to be able to raise up to an additional £5 billion a year as a result of their proposed measures. They anticipate that £1 spent on compliance activity will result in £9 of revenue and so reckon they will need to invest £555 million per year to achieve £5 billion of revenue.

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Some of the measures they propose introducing includes:

• increasing staffing at HM Revenue & Customs (HMRC) with an additional 5,000 staff.
• Focusing additional resource to target businesses with greater complexity and return.
• Ring-fencing “blockbuster” funding that can be used on strategically important criminal cases to increase the deterrence effect that a high-profile case can bring.
• Improving customer service at HMRC.
• Investing in digitisation and technology.

The plan also notes areas where changes to the law may be needed to help tackle tax non-compliance. This could include regulating the tax advice market and requiring a wider range of tax schemes to be reported to HMRC. For more details on the proposals, please see: https://labour.org.uk/wp-content/uploads/2024/04/Labours-Plan-to-Close-the-Tax-Gap.pdf