HMRC has published its “Measuring tax gaps 2016 edition”, which shows the tax gap estimates for 2014-15 – the difference between the amount of tax that should, in theory, be collected by HMRC, against what is actually collected. For the first time it includes landfill tax, for which there is a gap of £150m.
This is the first time an estimate of the landfill tax gap has been shown separately and HMRC explains in the report that a new methodology was developed to calculate the landfill tax gap estimates, but explains that “it does not include an amount for waste disposed of at illegal waste sites, as it is not taxable at this point”.
The report shows a rise in the landfill tax gap from £20m in 2005-06, rising sharply in 2009-10 to £50m, and sharply again in 2013-14 to £100m, before reaching its current peak of a £150m gap.
The total reported tax gap for the UK is reported at £36bn – 6.5 percent of liabilities. At £150m, the landfill tax gap is the same as that for stamp duty land tax, but less than inheritance tax at £475m.
The level of Landfill Tax losses is measured by comparing the net Landfill Tax theoretical liability with actual Landfill Tax receipts. The difference between these amounts is the Landfill Tax gap.
The net theoretical Landfill Tax liability has been produced using a combination of modelling, proxy indicators and tax professional expertise. It takes account of estimates for waste legitimately diverted away from landfill, versus unexpected shortfalls in revenue. The methodology does not include an amount for waste disposed of at illegal waste sites as it is not taxable at this point.