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Which has the greater impact: benefit fraud or tax avoidance?

Which has the greater impact: benefit fraud or tax avoidance?

The National Audit Office published figures last month citing the incorrect payments by the Department for Work & Pensions, as well as HM Revenue and Customs regarding those claiming state benefits and working tax credits.

The figures made murky reading and are likely to mean that the Department for Work and Pensions will miss targets for their promise in reducing payment errors. Over £4.2 billion was overpaid to claimants during 2013/2014, which is either down to administrative errors, or plain fraud. But despite that alarming amount, a further £1.6 billion had been underpaid to various claimants whose needs were not met by the government’s benefits. Coming so soon after the conservative government placed importance of reducing the amount of state benefit handed out, it raises questions as to why the right claimants are not receiving their entitled benefits but others may be able to cheat the system.

Despite the moral plight of many, there are many voices that believe that the greater damage to the economy is made through tax avoidance. The issue highlighted further once leaked documents from HSBC last year revealed that wealthy customers were helped to avoid taxes. The documents help reveal that thousands of people were able to hide millions of pounds worth of assets within the banking system. According to some sources, HMRC has retained a list of over 1000 tax evaders in the UK, over the last five years. Yet only one in that time has been convicted.

Last year figures were released showing that in 2012/2013 that the shortfall in tax collected by HMRC had risen to £34bn, including £14bn in uncollected income tax and £3.1bn of tax avoidance. According to these figures, tax evasion, the illegal act of deliberately hiding information about ones assents amounted to £4.1bn, and a further £5.4bn was lost due to criminal activity such as laundering and smuggling.

Whilst the discrepancies of benefit claims could account for a dividend of roughly £3bn, tax avoidance goes beyond once tax evasion is taken into account. As the morality of legal loopholes, or even legitimacy of them raises doubts as to whether an individual is committing a crime in the eyes of the law or a defending standpoint of criminal law solicitors.