A claim that the amount of money lost to tax evasion is “360x” higher than the amount lost to benefit fraud is re-circulating on social media.
The posts feature a graph comparing the amounts “lost yearly” to benefit fraud and benefit error with two estimates of the amount lost to “tax avoided, evaded & uncollected”.
We’ve fact checked posts sharing this graph before. These estimates do not show that the amount lost to tax evasion is 360 times higher than the amount lost to benefit fraud.
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Benefit fraud
Figures published by the Department for Work and Pensions (DWP) show that in 2023/24 £7.4 billion was overpaid in benefits expenditure due to fraud. This is approximately 2.8% of total benefits spending.
Overall, the government overpaid £9.7 billion in benefits payments, whether through fraud, claimant error or official error.
In 2022/23—the latest year for which both benefit fraud and tax gap figures are available—the DWP estimates £6.3 billion was overpaid in benefits due to fraud.
Tax gap
HM Revenue & Customs (HMRC) publishes annual estimates of the “tax gap”—the estimated difference between the amount of tax that should theoretically have been collected, and the amount actually collected.
The latest tax gap figure covers the 2022/23 financial year, and estimates that the overall tax gap was £39.8 billion. This figure, (or a similar one for past years) does seem to be reflected in the graph shared on social media.
Of this amount, approximately £5.5 billion was estimated to be lost due to tax evasion (illegal non-payment or underpayment of tax), with £1.8 billion lost due to tax avoidance (avoiding paying tax through schemes that operate “within the letter, but not the spirit, of the law”.
The remainder of the gap is accounted for by criminal attacks, “failure to take reasonable care” by the taxpayer, errors, the “hidden economy”, differences in legal interpretations and other non-payment (for instance, write-offs following insolvency).
These figures would suggest that the amount of money lost specifically due to “tax evasion” as the posts claim is actually lower than the amount lost to benefit fraud. The estimate of the overall “tax gap” is higher, meanwhile, but only about five times higher.
Alternative estimates
However, the graph shared on Facebook also features an alternative estimate of the tax gap, published by Richard Murphy, a chartered accountant and founder of the Tax Justice Network advocacy group, who has argued that HMRC significantly understates the amount of tax revenue lost to evasion, avoidance and debt.
A report authored by Mr Murphy and published by the Public and Commercial Services Union (PCS) in 2014 estimated that in the 2013/14 financial year the tax gap was actually £119.4 billion, of which £82.1 billion was accounted for by tax evasion, and £19.1 billion by tax avoidance. This appears to be the other tax figure referenced in the graph.
In response to the report HMRC said at the time: “The PCS tax gap estimate is over-inflated, flawed and muddled. The IMF has endorsed HMRC’s estimate of the gap at £35bn, which is in line with the code of practice for official statistics.”
Summarising the IMF’s findings in a report published in 2020 the National Audit Office (NAO) said: “The IMF concluded that HMRC produced one of the most comprehensive studies of the tax gap available internationally” and “found that HMRC’s methodology was sound and consistent with the approaches used by other countries” but that it “recommended broadening the scope of HMRC’s tax gap analysis to include the impact of policy choices on tax revenue”.
It also noted that in 2019 the Office for Statistics Regulation (OSR) had “praised HMRC’s tax gap statistics” but also “highlighted areas where HMRC can improve the transparency and trustworthiness of the published statistics”.
In response to the publication of the most recent HMRC tax gap estimate in June, Mr Murphy told the Guardian that the amount of tax not being collected could be closer to £100 billion.
Regardless of which estimate for the tax gap you use, none of these figures suggest that the total amount lost to tax evasion, avoidance and other uncollected tax is anywhere close to 360 times higher than the amount lost to benefit fraud, let alone the amount lost solely to tax evasion, as the posts claim.
We’ve previously fact checked a number of claims on social media making similar comparisons between the amount the government loses to benefit fraud versus the tax gap. Claims like these can spread far and fast online and are often difficult to contain or correct.