Back in September, a National Audit Office press release regarding tax evasion got a lot of coverage - in particular, its assertion that 81% of tax evasion was down to small businesses.
Two thoughts:
- Tax evasion is down to tax evaders. It’s not somehow perpetrated by small businesses as a class. If a takeaway is using sales suppression software to hide income from HMRC, that tells us absolutely nothing about small businesses generally. It tells us that at least one person within that particular business is a criminal.
- If 81% of tax evasion is down to small businesses, that means 19% must be down to larger businesses. Looking at the report, that means companies with sales revenue of between £10m and £200m a year (the report attributes zero tax evasion to businesses larger than that). This is more surprising! Businesses of that size generally have segregation of duties, external auditors, governance committees and so on. How on earth are they somehow managing to deliberately evade tax at an organisational level?
The second point (if the statistics are to be relied upon, anyway) is surely the more interesting story! If anything, you’d think 100% of tax evaders would fall into the “small business” category because that’s where checks and balances can be dodged.
In fairness, the report itself does drill into particular activities (like sales suppression software, and phoenixism), and it’s clear that HMRC are trying to look at those areas specifically. But headlines smearing small businesses generally are not especially helpful to anyone.