LONDON – Britain’s tax authority failed to collect £42 billion (S$68 billion) in 2021-2022, in large part because it did not have the staff to ensure compliance, leaving public finances under even greater strain, a committee of lawmakers said.

A report from the House of Commons Public Accounts Committee found that despite collecting a record £731 billion, the “tax gap” rose from £32 billion the previous year. Measured as a share of what was estimated to have been owed, the gap remained at 5 per cent.

While the proportional shortfall has fallen over the past decade, the cross-party group of MPs said HM Revenue & Customs could do more to help pay for public services such as the National Health Service, which is facing severe funding pressures amid pay demands from staff.

“For every £1 that HMRC spends on compliance activities, it recovers £18 in additional tax revenue. The government is missing the opportunity to recover billions in lost revenue by not resourcing compliance,” the report said.

MPs also claimed HMRC “lacks ambition to tackle fraud and error”. The authority, which is part of the Treasury, expects to recover only around a quarter of the estimated £4.5 billion lost in its Covid-19 support programmes.

Ms Meg Hillier, chairman of the committee, said: “The eye-watering £42 billion now owed to HMRC in unpaid taxes would have filled a lot of this year’s public spending black hole.

“But the public purse will continue missing out on billions of desperately needed revenues as HMRC will only employ more staff to tackle compliance over the next few years – not fast enough to dent the tax gap at a time of huge public sector spending pressures.”

HMRC said: “Since 2005, we have cut the UK’s tax gap by more than 30 per cent, and we continue to prioritise collecting unpaid taxes.” BLOOMBERG