Britain's tax 'black hole' is due to another bad algorithm

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• Britain's tax 'black hole' is due to another bad algorithm

A UK government claim that up to €31 billion in tax revenue is not collected each year has been calculated using an algorithm that was created for the US tax system. HMRC is currently working to revise the calculation, which which could mean that the figure could change significantly up or down. The tax gap, which is supposed to show the difference between the money owed to the taxpayer and the amount actually collected, will change as Foreign Minister Rishi Sunak plans to raise taxes in the next budget. According to the Mail on Sunday, a new system is being developed that will replace the software currently in use. It was developed by the US Internal Revenue Service (IRS) and produces financial calculations based on the difference between what a senior auditor in the US might find and what an average auditor might recover .

Calculating taxes

Finance Secretary Jesse Norman said in July that the €31bn spread was the lowest on record. At the same time, the Treasury said it had reduced the spread of its tax liabilities to 4.7% for the 2018-2019 fiscal year. This figure is 7,5% lower than in 2005-2006. Jim Harra, the UK's current head of revenue, will answer questions from members of the Public Accounts Committee on the matter tomorrow. The central issue of the proceedings is probably why US software is used to produce UK tax calculations when the two countries have very different tax systems. Compared to the US, where almost everyone files their own tax returns, many UK taxpayers are often enrolled in PAYE, which receives income directly from their wages.