The credibility gap

Posted by Christie Malry on May 24, 2012 at 9:26 pm

In 2010, Richard Murphy (in)famously estimated that the "tax gap" is £120bn

Since that time, we have had an emergency budget review and two finance bills. There have been substantial changes to the tax system, including changes to individual and corporate tax rates and VAT. National insurance has also changed, as have the levels at which these various taxes apply. We've had some very important decisions around particular cases, such as the decision by HMRC to settle with Vodafone over its CFC dispute rather than continuing to fight (and potentially lose) the case. And it may not feel much like it, but we have had GDP growth since Q2 2010.

Also we've had a number of commentators, including this humble blogger (but also, importantly, HMRC), raising serious criticisms of perceived errors in Ritchie's estimate.

The economic and political environment are very different now compared to 2010, and the tax system has changed considerably.

Yet, Ritchie wants us to believe both that his estimate of the tax gap is completely unaffected by all of these changes and also that there is no need to take account of any of the criticisms that have been levelled at his work.

Really? I mean, really?

I have always believed his estimate to be unbelievable, but his insistences that his estimate is totally impervious to any change in the external environment and that every single one of his critics is wrong are simply not credible.

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