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Unpaid tax costing government £20bn

If national government met local councils’ tax collection rates, it could save £20bn each year, the LGA has stated.

New analysis shows failure to recoup unpaid tax costs every household in England and Wales £1,270 a year. The total unpaid tax is around £32bn, made up of £14bn from tax evasion, £5bn tax avoidance, £4bn non-payment, £4bn legal interpretation, £3bn from failure to take reasonable care and £2bn in errors.

Local government collects 97.5% of tax from over 22 million homes and 1.8 million businesses while central government only collects 93.25%.

Cllr Sharon Taylor, chair of the LGA's Finance Panel, said: “If central government's collection rates were as good as those of councils, the public purse would be more than £20bn better off. That's almost double the size of the total spending cuts announced in the Chancellor's Spending Round. When the taxman's balance sheet falls short, it takes a toll on public services across the board.

“Local government is the most efficient part of the public sector. Council tax has one of the highest collection rates of any tax. We cannot afford for local services like road maintenance, libraries and social care to continue paying the price of those who evade and avoid their tax liability. We all need Government to do better in tackling this.

“Local authorities collect council tax from more than 22 million homes. If councils can obtain more than 97% of this, it is reasonable that Whitehall should be able to match this.

“Government has made positive noises on tackling unpaid tax. We now want to see a clear timetable which sets out how Government will significantly improve their tax collection record.”

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