Tax-dodging and non-compliance during the pandemic cost the UK government £9bn, a new report has claimed.
According to the National Audit Office (NAO), the loss came as HMRC moved thousands of tax compliance staff to Covid support schemes.
This reduced its capacity to properly investigate businesses and people who were not paying the correct tax.
Roughly 1,350 workers were redeployed during the pandemic, shrinking the workforce on tax compliance by 12%.
Prior to the lockdown, HRMC’s strategy focused on improving compliance by educating, making it easier for people to get tax right the first time.
It would also conduct investigations where there was suspected fraud or criminal activity.
However, HMRC paused several open enquiries into suspected non-compliance except under special cases of fraud or crime, resulting in it closing 29% fewer cases in 2020-21 than in the previous year.
Criminal prosecutions for tax-related offences also decreased markedly during the pandemic, the NAO said.
HMRC estimates that from 2020 to 2022, compliance staff generated £1.1mln in revenue per staff member.
This figure was slightly lower than the £1.3mln per staff member reported on average in the five years before the pandemic, showing staff were less cost-effective.
The NAO suggested that HMRC improves how it estimates and reports the additional revenues its compliance work generates, including the extent of errors affecting taxpayers.
“There is little doubt that HMRC’s compliance work offers good value for money, but it needs to evaluate its performance more consistently,” said Gareth Davies, the head of the NAO.
“Improving the effectiveness of HMRC’s compliance work can help maximise the amount of money available for public services in a challenging economic context.”