Richard Cornelisse

The VAT tax gap is up – and that has to be the consequence of fewer staff to collect it

In Audit Defense, EU development, Processes and Controls on 06/03/2014 at 1:52 pm

From Tax Research UK

HMRC have this week given publicity to their initial estimate of the VAT tax gap for 2012 – 13.

This is their estimate of the amount of VAT that should have been paid if UK law had been complied with compared to the amount of VAT that was actually received by them in that year.

This is what it looks like:

Screen-Shot-2014-03-05-at-09.26.15

I will have a lot more to say on this issue shortly.  Suffice for now to say that the VAT  tax gap  has increased and that cannot be down to changes in VAT rates on this occasion: this must be down to inadequate resources. The simple fact is, you cannot sacks staff at HMRC  without consequences. This  increase in the VAT tax gap is one of them.

Richard Cornelisse comment: Interesting conclusion.  I raised this correlation from a consultancy perspective on March 2012 in “One Man’s Weakness Is Another Man’s Strength: So Let’s Team Up“:

Let’s consider an example. In the downturn and not making budget, the one-minute solution is often to downsize or stop recruiting.

In the short term, this is the easiest way to improve the bottom line. It might be the right decision, but only if you know the impact in the long run.

If the root cause of not making budget is on a higher level—for example, if the business is run neither effectively nor efficiently (e.g., due to a lack of teamwork or the proper training to deal with new situations)—the long-term result of such a decision might be unprofitability.

Thus, recognizing the problem using the scientific method is the opening chapter, and measuring the problem is the next. A lawyer never assumes anything but should know the facts. Here, we are talking about the same principle. 

  1. Is the business run efficiently and effectively to meet the client’s needs?
  2. Was the change foreseen, and has the leadership taken action?
  3. How much money was lost due to disconnect or internal competition
  4. Has proper training been provided to deal with these new client needs?
  5. Is teamwork being stimulated?

The above are just a few root cause analysis questions.

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