Comparison of benefit fraud and tax avoidance losses is inaccurate

24 August 2023
What was claimed

For every 1p lost to benefit ‘thieves’, £2 is lost to tax avoiders.

Our verdict

This isn’t correct. The Department for Work and Pensions estimates that in 2022/23 £6.5 billion was overpaid in benefits due to fraud, while HMRC estimates that, in the most recent financial year for which figures are available, approximately £1.4 billion less was collected in tax than theoretically should have been as a result of tax avoidance.

A post shared on both Twitter (now known as X) and Facebook claims that “For every 1p lost to benefit ‘thieves’, £2 is lost to Tax Avoiders.”

This is not correct. According to government figures, more revenue is estimated to be lost due to benefit fraud than tax avoidance.

Misleading claims about public finances often spread widely on social media. These claims have the potential to harm individuals, groups, democratic processes and institutions, as they can be difficult to contain and correct.

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Benefit fraud

Figures published by the Department for Work and Pensions show an estimated £6.4 billion in benefits were overpaid as a result of fraud in 2022/23 (around 2.7% of total benefit spending). This is a decrease of approximately £100 million compared to the previous financial year, when an estimated £6.5 billion was overpaid in benefits as a result of fraud.

Overall, the government overpaid a total of £8.3 billion in benefits in 2022/23—whether through fraud, claimant error, or official error—approximately £1 billion of which was ultimately recovered.

It’s worth noting that these figures are estimates based on a sample of benefit claims.

Tax avoidance

Previous claims we’ve fact checked comparing the amount lost to benefit fraud and tax avoidance have been based on the “tax gap”—the estimated difference between the amount of tax that should have theoretically been collected, and the amount actually collected.

His Majesty’s Revenue & Customs (HMRC) estimates that in 2021/22, the most recent financial year for which figures are available, the tax gap stood at £35.8 billion.

However, only around £1.4 billion of this is estimated to be accounted for by tax avoidance—meaning this reason accounts for a smaller proportion of the tax gap than any other at 4%.

The government says tax avoidance schemes operate “within the letter, but not the spirit, of the law”. Tax evasion, which is illegal, accounted for approximately 13% of the tax gap in 2021/22 (around £4.7 billion).

Even when comparing the entire tax gap to the amount lost to benefit fraud, the Facebook post’s claim still wouldn’t be correct. In 2021/22 (the latest financial year for which both figures are available), HMRC’s estimate for the total tax gap was roughly five times larger than the DWP’s estimate for the amount lost to benefit fraud (as opposed to 200 times larger, as the post suggests).

Image courtesy of Sarah Agnew

Correction 24 August 2023

We’ve corrected an earlier version of this fact check which referred to a £100 million increase in the amount estimated to have been overpaid due to benefit fraud in 2022/23. It was actually a decrease.

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