Applied tax gap analysis in the United Kingdom- Its use in tax administration, and future researchMick ThackrayKnowledge, Analysis & IntelligenceEnforcement and ComplianceHM Revenue & Customs

June 2012

How does HMRC use their tax gaps?Annual publication

HMRC Vision & Strategic Objective 1

Performance Management

Strategic resource allocation

Evaluation

Future work

Defining the tax gapWe define the tax gap as the difference between the tax that is paid and the tax that we consider should be paid. It therefore includes amounts we consider should be due in accordance with the spirit of the law as well as the letter of the law.This definition is a product of what we use tax gap analysis for to assess the threats to the tax base. Differences over the interpretation of the law can lead to substantial losses in tax against expected receipts and increase HMRCs operational costs so are an important part of the picture.

The tax gapOn September 21st 2011 the latest estimate of the UK tax gap was published: http://www.hmrc.gov.uk/stats/mtg-2011.htm It related to 2009-10 and amounted to 35bn or 8% of theoretical liabilities. This is the net tax gap ie after HMRCs compliance activities.Tax gap broken down by behaviour

Chart2

0.14

0.12

0.14

0.11

0.16

0.12

0.13

0.07

Error7%

Legalinterpretation14%

Non-payment13%

Avoidance14%

Evasion 12%

Failure to take reasonable care 11%

Criminalattacks16%

Hidden economy 12%

Sheet1

Avoidance 14%14.0%

Evasion 12%12.0%

Legal interpretation 14%14%

Failure to take reasonable care 11%11%

Criminal attacks 16%16.0%

Hidden economy 12%12.0%

Non-payment 13%13.0%

Error 7%7.0%

Sheet1

0

0

0

0

0

0

0

0

Hidden economy 7.5%

Criminal attacks12.5%

Failure to take reasonable care 15%

Evasion 17.5%

Avoidance 17.5%

Non-payment 7.5%

Legal interpretation 15%

Error7.5%

Sheet2

Sheet3

Tax gap by taxIn 09/10 VAT had the largest tax gap followed by CT. IT has the smallest tax gap largely because the bulk is collected through PAYE. This is not unexpected as research shows that tax gaps are higher for taxes that do not operate withholding regimes where there is less opportunity to understate income levels. The tax gap for income tax paid by the self employed is much higher

Chart1

0.138

0.065

0.058

0.117

Tax Gaps by Tax 2008/09

Sheet1

VAT13.80%

Excises6.50%

IT/NICS/CGT5.80%

CT11.70%

Sheet2

Sheet3

PublicationPublished in full in September each yearGenuine area of public interestAllows external analysts to understand - and challenge - methodologyOfficial Statistics covered by the UK Statistics & Registration Service ActCurrent administrations transparency agenda:Allows public, and parliament, to monitor HMRCs performanceInforms public debate on taxation (fiscal deficit and austerity regime)Counters special interest claims

http://www.hmrc.gov.uk/stats/mtg-2011.pdfhttp://www.hmrc.gov.uk/stats/mtg-annex2011.pdfhttp://www.hmrc.gov.uk/stats/vat-gap.pdfhttp://www.hmrc.gov.uk/research/taxgap-workingpaper.pdf

HMRC Vision and Strategic Objective 1HMRC VisionWe will close the tax gap, our customers will feel that the tax system is simple for them and even-handed, and we will be seen as a highly professional and efficient organisation

Strategic Objective 1

Maximise revenue to close the tax gapOur objective is to provide the money for public services by maximising revenue to close the tax gap and improving the extent to which individuals and businesses receive the credits and payments to which they are entitled

Tax gap - trendsOverall the tax gap fell in percentage terms between 2004/05 and 2007/08. It rose again in 2008/09 largely as a result of the increasing VAT gap driven by payment problems arising from the recession.Note: VAT Gap figures revised in December 2011 (http://www.hmrc.gov.uk/stats/vat-gap.pdf), but tax gap totals not yet adjusted.

Chart1

0.16

0.061

0.054

0.139

Tax Gaps by Tax 2008/09

Chart2

0.27

0.14

0.1

0.09

0.06

% tax gap by country

Chart3

0.1050.085

0.1390.083

0.1210.08

0.110.074

0.130.081

0.1060.079

VAT

Total

Trends in % tax gap

Sheet1

VAT16.00%

Excises6.10%

IT/NICS/CGT5.40%

CT13.90%

Mexico (2004)27%

USA (2001)14%

Sweden (2001-05)10%

UK (2008-09)9%

Denmark 2007)6%

2004/052005/062006/072007/082008/092009/10

VAT10.50%13.90%12.10%11.00%13%10.60%

Total9%8.30%8.00%7.40%8.10%7.90%

Sheet2

Sheet3

Performance managementPerformance Management FrameworkReporting framework for HMRC senior managementPerformance against Strategic Objective 1 reported in tax gap currency:Direct effects of interventions cash to bankIndirect effects (Future Revenue Benefit): deterrence and prevention effectsRevenue protection: maintenance of tax gaps, eg repayments refused, loopholes closedTax gaps themselves are not a target or performance measureTax Compliance Risk OverviewComprehensive assessment of compliance risks and issues for HMRC and HM Treasury senior managersFinancial dimension of risk score based on tax gap estimatesLink to HM Treasurys fiscal risk management

VAT: How has the UK done in recent years?Source: Provisional VAT gap estimates: Official Statistics Release, HM Revenue & Customs December 2011 (NB: mid-range MTIC estimates)

billion2005/062006/072007/082008/092009/102010/11VTTL84.788.392.191.779.994.7VAT Gap11.710.710.111.98.59.2

Chart2

0.15425531912002/03

0.11607142862003/04

0.10455104552004/05

0.13813459270.0968122786

0.12117780290.0956964892

0.10966340930.0960912052

0.12977099240.1161395856

0.10638297870.090738423

0.09714889120.0892291447

VAT Gap

VAT Gap. less MTIC

VAT Gap

Sheet2

YearVTTLVAT GapVAT GapMTICMTICMTICVAT Gap. less MTICVAT Gap. less MTICVAT Gap. less MTICVAT Gap. less MTICVAT Gap. less MTICVAT Gap. less MTIC

2002/0375.211.615.4%

2003/0478.49.111.6%

2004/0581.38.510.5%

2005/0684.711.713.8%343.58.77.78.210.3%9.1%9.7%

2006/0788.310.712.1%22.52.258.78.28.459.9%9.3%9.6%

2007/0892.110.111.0%11.51.259.18.68.859.9%9.3%9.6%

2008/0991.711.913.0%11.51.2510.910.410.6511.9%11.3%11.6%

2009/1079.98.510.6%11.51.257.577.259.4%8.8%9.1%

20010/1194.79.29.7%0.510.758.78.28.459.2%8.7%8.9%

Sheet2

00

00

00

00

00

00

VAT Gap

VAT Gap. less MTIC

VAT Gap

Sheet1

HH VTTLReceipts (lagged)RatioGDPHH VTTLReceipts (lagged)HH VATVTTLReceiptsVTTL ratioGDPGDP growth

1973Q01529-30-614778919732,2941,47064%590,050YearVAT Gap

1973Q0254747914833719742,3882,509105%582,30398.7%2002/0315.6%

1973Q0358581013814711119752,6593,457130%578,68099.4%2003/0412.1%

1973Q0463364310214681319763,1073,771121%593,928102.6%2004/0511.6%

1974Q015825118814333919773,5744,272120%608,032102.4%2005/0614.7%

1974Q0262967610714600119784,1034,903119%627,669103.2%2006/0713.1%

1974Q0355963611414740619796,8387,979117%644,491102.7%2007/0812.5%

1974Q0461868611114555719809,88211,102112%631,07497.9%

1975Q01587737125146219198110,94911,882109%622,72298.7%

1975Q02640836131143756198211,98913,776115%635,756102.1%Year2002/032003/042004/052005/062006/072007/08

1975Q03690891129143408198313,19115,283116%658,798103.6%VAT Gap15.6%12.1%11.6%14.7%13.1%12.5%

1975Q04741993134145297198414,19518,558131%676,394102.7%

1976Q01700868124147987198515,58019,363124%700,740103.6%

1976Q02735907123146753198617,17921,332124%728,856104.0%

1976Q03800903113148087198718,86924,238128%762,107104.6%

1976Q048721093125151101198821,22827,217128%800,457105.0%

1977Q01813884109151520198923,23429,553127%818,719102.3%

1977Q028501050124150745199025,27130,931122%34.430.989.9%825,099100.8%

1977Q039231041113151857199129,10435,258121%39.735.388.7%813,61098.6%

1977Q049891297131153910199230,86237,215121%42.337.288.0%814,803100.1%

1978Q019441110118154747199332,34639,211121%44.139.289.0%832,910102.2%

1978Q029721185122156170199435,08641,722119%47.441.787.9%868,560104.3%

1978Q0310661236116157813199537,21343,054116%50.043.186.0%894,988103.0%

1978Q0411211372122158939199640,34146,644116%53.746.686.9%920,757102.9%

1979Q0110731177110157657199742,80450,585118%56.850.689.1%951,208103.3%

1979Q0211681511129164347199845,23752,304116%60.252.386.8%985,506103.6%

1979Q0322142314105160435199947,77256,395118%64.556.487.4%1,019,735103.5%

1979Q0423842977125162052200050,18258,503117%68.058.586.1%1,059,658103.9%

1980Q0123212583111160682200152,58061,026116%71.461.085.5%1,085,745102.5%

1980Q0223482734116157720200255,72863,451114%75.263.584.4%1,108,508102.1%

1980Q0325522774109157287200358,43069,075118%78.369.188.2%1,139,746102.8%

1980Q0426613011113155385200461,39273,021119%81.973.089.2%1,171,178102.8%

1981Q0125412677105154580200563,35972,855115%85.472.985.3%1,195,276102.1%

1981Q022618241792154758200665,67077,360118%88.977.487.0%1,229,196102.8%

1981Q0328182885102156732200768,48780,598118%92.380.687.4%1,266,680103.0%

1981Q0429723903131156652200851,63960,861118%91.777.184.1%1,275,674100.7%

1982Q0127993297118157337

1982Q0228533192112159257

1982Q0330703419111159194

1982Q0432673868118159968

1983Q0130863528114162336

1983Q0231343618115163548

1983Q0334033872114165482

1983Q0435684265120167432

1984Q0133263872116169016

1984Q0234144034118167826

1984Q0335944931137168590

1984Q0438615721148170962YearTotal HMRCIncome tax (2, 3)National Insurance Contributions (3, 4)Capital gains tax (5)VATCorporation tax (6)Petroleum revenue taxFuel dutiesTobacco dutiesSpirit dutyBeer dutiesWine dutiesCider & perry dutiesStamp dutiesBetting & gaming dutiesCustoms duties & leviesAir passenger dutyInsurance premium taxLandfill taxClimate change levyAggregates levyInheritance taxMisc

1985Q0136194526125172846

1985Q0237064461120175562

1985Q0340015167129175568

1985Q0442535209122176764

1986Q0140204955123179419

1986Q02411751751261814632001-02321767107994631683034610433204113102191777541919289919821556984143920428061861502555-2355-

1986Q03438858691341824612002-03324731109507645531596636252926895822147805522732935193615375491292190781621385418292472354-

1986Q04465453331151855132003-043438641139687245722256927528077117922786809323623044200615375451347194279122946078323392504-

1988Q01435258181341865302004-053710751229207809822837305833573128423314810323853101223315789661421219686423596727643342922-

1988Q02446054441221884972005-06397912130481855223042728564182920162343879592309307623081681091814212258905234373374432632591

1988Q03485365051341926372006-07423659143327872733813773604430821552358581492256307223852001339213912325971231480471232135451

1988Q04520464711241944432007-0845105314732410041052688059946383168024905809423743067264122014124148124561994230687768833938240

1988Q01489462491281976762008-09 (7)43861714766496928783978443427652566246128218235831272741244799414742659186222819547163342838-

1988Q0250296675133198608

1988Q0354967302133201368

1988Q0458096991120202805Personal taxes244,59256%

1989Q0154016962129203559VAT7844318%

1989Q0255607368133204838Corporation tax4533110%

1989Q0359707843131205043Excise duties4277410%

1989Q0463037380117205279Other27,4776%

1990Q0158797393126206986438617100%

1990Q0260787646126208078

1990Q0365028169126205606

1990Q0468127723113204429

1991Q0159707776130204244

1991Q0271608572120203565

1991Q0378369458121202793

1991Q0481389452116203008

1992Q0170688663123203283

1992Q0274429096122202796

1992Q03808610564131203801

1992Q0482668892108204923

1993Q0174259212124206178

1993Q0276529126119207116

1993Q03853410613124208906

1993Q04873410260117210710

1994Q0178849801124212969

1994Q02841710055119216000

1994Q03917211242123219001

1994Q04961310624111220590

1995Q01850810421122221346

1995Q02880910505119222548

1995Q03969611276116225059

1995Q041019910852106226035Year (liability)HouseholdsExemptGovernmentHousingCharitiesTotalVTTL

1996Q019209121741322281222008467,132101,65386,65629,79812,719701,131103,234

1996Q0296431057211022917867%14%12%4%2%100%

1996Q031045512313118230773

1996Q041103511585105232684

1997Q01983212066123234465

1997Q021031512318119236384

1997Q031110413355120238753

1997Q041155212846111241606

1998Q011040912337119243576

1998Q021085812778118245084

1998Q031170813660117247135

1998Q041226213529110249711

1999Q011113113540122251140

1999Q021159113755119253110

1999Q031206014507120256322

1999Q041299014593112259163

2000Q011182714290121262040

2000Q021221014294117264583

2000Q031258415332122265908

2000Q041356114585108267127

2001Q011235815008121270054

2001Q021278514707115270722

2001Q031325615982121271977

2001Q041418215329108272992

2002Q011311215779120274918

2002Q021363615171111276010

2002Q031401016721119277923

2002Q041497015780105279657

2003Q011365216529121281208

2003Q021425917047120283851

2003Q031467518169124285990

2003Q041584417330109288697

2004Q011438318039125289984

2004Q021504617707118292706

2004Q031538618831122293272

2004Q041657718449111295216

2005Q011494217342116296453

2005Q021556118188117298302

2005Q031583019033120299529

2005Q041702518293107300992

2006Q011535118021117304412

2006Q021616918731116306456

2006Q031655221058127307853

2006Q041759819550111310475

2007Q011601220123126312950

2007Q021676719301115315650

2007Q031717621327124318160

2007Q041853319850107319920

2008Q011684520077119321144

2008Q021732221227123321160

2008Q031747219526112319078

314292

Sheet1

47144305.3156439455

42523961.1841538925

31004071.7850887554

50074628.9732350052

41203836.7049829623

31914291.6372115287

51184508.1283073886

44043587.5811684028

38335012.8123433118

47914120.2104524401

53124328.1526055065

27433983.9058732292

51644396.798667508

37693644.1885807064

34044411.8223920132

53835069.581592683

40383666.8495661632

33574646.1061743091

51374276.8420795779

51064305.5415611823

34174490.6511578526

48634237.8059194972

51204211.4943609025

35465017.4477968483

54054519.831454304

43174105.2285800038

38185094.2786214259

50854481.7198842593

50144564.4273367205

36564987.2949180696

52794441.6148271826

54224573.7945197161

38064985.5180839462

58585067.5163466194

50664250.6834892559

36695074.0869165973

55944907.4121670892

47714622.0177055314

39255002.8680004695

53984945.1406698834

53234695.2946217673

35735147.1227283627

57164709.1807612619

54354699.9014986877

41815173.5560816363

59665286.0848240968

50534375.1088059283

35684990.0146226071

57965188.765836615

52594788.7261511639

39535280.6621791836

58675258.0205250378

51424679.3344743924

36985297.6855579205

62245258.4168970727

52364590.4045465882

45225285.1406007659

58394832.5510283768

55635002.8843895628

39275359.5893588105

63325909.7602804709

55535210.1051053821

38945165.0652632695

62295648.0909065086

53784833.5680154928

35645304.7299558386

67925471.8430896747

54655179.3899171596

44645143.0768862014

67345516.0478674183

59045460.298232643

31425232.8137073185

68305480.5714122458

54165237.4343498503

42835715.5390755279

70775861.9279042844

58175837.4608230157

41515681.5950333024

71845650.6799361882

56825823.2387425439

53055838.9023870154

74695703.2874395891

63426216.0173483759

35195687.4621718624

80346300.6481804995

56546039.245911403

43515684.2238880436

74255859.4440870002

62156365.0519383991

40675813.6117628714

74765462.1153712271

63476531.9362185708

50085854.500037616

76725976.2672563716

58886037.6971099088

48846404.4813991396

73695878.0157941997

5536.75968.2643153563

4435.66049.3702715075

7462.75785.075489379

6251.16572.845144992

4473.596615246226.5909520142

7713.85800.9172778852

6193.36409.0526952978

5125.65650.2805447928

7944.56372.3111478172

6152.46240.2665627731

4197.26300.3642161136

77116006.9310275931

55166114.3904878415

47946120.1462146928

79766382.7467538673

63806351.1886907042

43756466.5213350844

85416438.6228455059

66986776.6395277078

58196819.8755054883

85197011.0325242614

63246570.3262850765

4706.86580.942591743

85286806.292468261

64106759.8781011185

51856756.4077376039

87086379.2179332706

62756678.2517544082

43186418.6299272885

94566789.0077382939

63636895.8361418236

55066776.1803866251

89276975.6461116626

61346761.7579747774

47886403.4577506938

91157526.8444653274

60276652.4218089167

49466293.6393494585

105258099.0571956963

61656797.5410210673

45466603.4956854851

97026887.4531527672

53985819.9252523017

44375837.9179024109

79695795.4231208862

56265875.7769682352

39875737.2297116449

70654927.090090192

48815606.7109480234

41585333.9390434084

69684636.8453734732

4002640026

Rate cut

Unadjusted

Seasonally adjusted

m

Total VAT

Chart1

0

0

0

0

0

HMRC tax receipts 2008/09

Mick's chart

0

0

0

0

0

VTTL 2008/09

334132202196019601960

371125246

33658278

522210312

447164283196119611961

478155323

37884294

543209334

568185383196219621962

536180356

47297375

620256364

572183389196319631963

531183348

439111328

612252360

524184340196419641964

506180326

41388325

661272389

640210430196519651965

585204381

59089501

780302478

811241570196619661966

862218644

600127473

977348629

944319625196719671967

929349580

702171531

960391569

897307590196819681968

775279496

586148438

907374533

872318554196919691969

871308563

798171627

969384585

981318663197019701970

966339627

744169575

998443555

760310450197119711971

945285660

777172605

1024399625

877291586197219721972

799293506

614160454

773406367

710273437197319731973

653308345

463130333

749369380

713264449197419741974

844309535

829224605

1334598736

1238540698197519751975

1317593724

1138279859

1705875830

1554687867197619761976

1490653837

1150324826

1745847898

1542653889197719771977

1533602931

1125336789

1631834797

1341549792197819781978

1373610763

977281696

1395825570

1274599675197919791979

932329603

829215614

1502921581

1498757741198019801980

17257181007

14433341109

222411261098

261210171595198119811981

1610640970

20242581766

23508561494

31229092213198219821982

308210402042

24613952066

340214012001

339711832214198319831983

342411962228

27216012120

386418272037

359713632234198419841984

346913032166

27217491972

393418452089

367114392232198519851985

407516162459

29877092278

416519972168

352014212099198619861986

393714322505

30366082428

391217432169

322711312096198719871987

28599531906

25536941859

280013381462

26039671636198819881988

24149421472

17475071240

266312511412

25678541713198919891989

281411031711

20275481479

304815151533

332712672060199019901990

335612862070

33019852316

506724392628

544020763364199119911991

561521553460

470013683332

607227693303

633226193713199219921992

604326093434

557717103867

647327963677

623524273808199319931993

520120523149

435614202936

491623452571

488718063081199419941994

407816272451

397114142557

379217502042

380314412362199519951995

335912762083

363013872243

374414152329

354413062238199619961996

333312702063

329912462053

328512582027

315212321920199719971997

314212761866

314811551993

316810722096

3265133319323102.131290.011812.12

3251131219393251.281258.181993.1

3323127520483393.911333.042060.87

3364129620683455.691334.782120.91

3912137925333714.071331.792382.28

3590129422963613.451230.812382.64

3376124021363451.821306.432145.39

3402129621063500.651339.962160.69

3637121024273451.411162.762288.65

3370130020703379.151219.942159.21

3709123124783795.911313.492482.42

3601118424173690.541228.812461.73

3943135925843766.911316.362450.55

3684134823363704.361266.892437.47

364094027003721.911021.352700.56

3705102826773778.831070.412708.42

4141140827333982.091364.352617.74

4066167923874036.691555.972480.72

3808139024183929.751502.462427.29

4291175425374357.481808.222549.26

3797158522123689.111552.12137.01

3767147022973736.521377.632358.89

3314107522393417.61167.182250.42

3306110422023340.761137.082203.68

3248120820403177.7411961981.74

3108119719113069.481124.671944.81

2900106118392988.831129.351859.48

2936111818182955.941133.971821.97

3010110119092950.271097.31852.97

3407142219853354.921344.982009.94

3306145418523397.151523.591873.56

3170125619143190.661267.131923.53

3564147320913501.161477.942023.22

3235126319723198.331197.872000.46

3172128618863241.191332.381908.81

3166139617703196.321409.811786.51

3274138418903207.221391.751815.47

3191139917923094.531334.241760.29

3113123418793166.721277.161889.56

2929114817813038.531161.851876.68

3262108021823172.211097.562074.65

3689141022793638.581339.932298.65

4059146725924117.541494.692622.85

4525153729884606.661561.813044.85

Total

Compulsory Liquidations

Creditors Voluntary Liquidations2

Total

Compulsory Liquidations

Creditors Voluntary Liquidations

1.21378357821976

1.19532523881977

1.19485286781978

1.16684285281979

1.1235099231980

1.08523591621981

1.14903313751982

1.15855994761983

1.30734944161984

1.24280253011985

1.24175876111986

1.28455656071987

1.28211639061988

1.27195517831989

1.22396139550.8987516853

1.21144850970.8870355143

1.20584269710.880362132

1.21225398160.8896181095

1.18914300010.8793308047

1.15696714820.8603854489

1.15624698080.8688436174

1.18179074620.8905330857

1.15622792690.8681952438

1.18049750040.8742904633

1.16581005760.8605088349

1.16062148830.8550567798

1.13859311920.8441763273

1.18218278890.8824707803

1.18942553820.8918843476

1.14988592330.8533476459

1.17801586360.8697698979

1.17683496760.8736557913

1.17859286942008

Households' VAT

VTTL

Households VAT

VTTL

Total VAT receipts as a ratio of households VAT liability and VTTL

MBD0001C4C1.xls

Chart1

0.12546448410.1166048396

0.12377681850.1189574404

0.15397977440.1249474187

0.14068804150.1262388746

0.13684701230.1319466924

VAT Gap

VAT Gap, less MTIC

VAT Gap

Sheet1

YearVAT GapVAT Gap, less MTIC

2002-0316.0%

2003-0412.5%11.7%

2004-0512.4%11.9%

2005-0615.4%12.5%

2006-0714.1%12.6%

2007-0813.7%13.2%

Sheet1

0.12546448410.1166048396

0.12377681850.1189574404

0.15397977440.1249474187

0.14068804150.1262388746

0.13684701230.1319466924

VAT Gap

VAT Gap, less MTIC

VAT Gap %

Sheet2

Sheet3

The VAT Gap is only an indicator of levels

Chart1

0.1490.1570.1540.152001-022001-022001-022001-02

0.1580.1680.1590.1610.1540.1570.1560.154

0.1290.1350.1240.1260.1170.1210.120.116

2004-050.1350.1170.1240.1120.1180.1170.105

2005-062005-060.1450.1550.1470.1540.1520.139

2006-072006-072006-070.1420.1320.1330.1350.121

2007-082007-082007-082007-080.1250.1230.1250.11

2008-092008-092008-092008-092008-090.1530.160.13

2009-102009-102009-102009-102009-102009-100.1390.106

2010-112010-112010-112010-112010-112010-112010-110.097

2004

2005

2006

2007

2008

2009

2010

2011

VAT Gap

VAT gap estimates by year of publication

Sheet1

VAT gap as a % of VTTL as published in MITL

VAT gap as a % of VTTL

MITL2001-022002-032003-042004-052005-062006-072007-082008-092009-102010-11

200214.6%

200314.7%15.7%

200414.9%15.8%12.9%

200515.7%16.8%13.5%13.5%

200615.4%15.9%12.4%11.7%14.5%

200715.0%16.1%12.6%12.4%15.5%14.2%

200815.4%11.7%11.2%14.7%13.2%12.5%

200915.7%12.1%11.8%15.4%13.3%12.3%15.3%

201015.6%12.0%11.7%15.2%13.5%12.5%16.0%13.9%

201115.4%11.6%10.5%13.9%12.1%11.0%13.0%10.6%9.7%

Sheet2

Sheet3

Compliance Resource Allocation Management (CRAM)Main purpose is to inform compliance strategy and resource allocation decisions in Local Compliance, and (under development) Special Investigations & Risk Intelligence ServicesOptimal resource allocation decisions require understanding of full impact of resource changes on compliance behaviour, expressed in tax gap currencyAttitudinal segmentation of taxpayers, with conceptual and theoretical models of compliance behaviour, enable us to use a numerical modelPrincipal uses:HMRC Strategy March 2010Spending Review September 2010 (917m investment)Ongoing forecasts of Change benefitsPROTECT

CRAM how it works

Segmentation overview for individuals Individuals Segmentation Summary Pack| * | *Note: additional segments for organised fraud and payment defaulters

Evaluation: OECD frameworkOutcomes can be viewed over short, medium and long termAdapted from OECD Forum on Tax Administration: Evaluating the effectiveness of compliance risk treatment strategies

Future workDisaggregation or segmentation by:Customer groupCustomer behaviourCustomer attitudes (customer-centric strategy)Bring up to date via synthesis of:ForecastsLeading indicatorsBusiness intelligenceRisk IntelligenceEngagement with external academics (credibility)Continuing research into indirect effects

Thank you!

Discuss trend*Level subject to a margin of errorRobust trend