Tax vs benefits.

Benefit error including fraud is £1bn, which includes pensions, child benefit etc. This in comparison to figures ranging from a minimum of £23-70bn in tax avoidance, especially from large business. Why is this government obsessed with the smaller figure? Corruption reaches the very top, that's why.
Benefit fraud is just a distraction from real issue of tax dodgers http://on-msn.com/10Nv08g

18 December 2012 15:18 | By Richard Murphy

Benefit fraud is just a distraction from real issue of tax dodgers

Iain Duncan Smith is exaggerating one problem while the government try to hide another one.Share280Share1.9KIf I were the Chancellor, one of my very highest priorities would be to close the gap between what businesses owe in tax and what they actually pay.This government, however appears preoccupied by a different kind of fraud in the benefits system. Why?Well, Iain Duncan Smith, the work and pensions secretary, claims that £10 billion has been lost in fraud and error under the tax credit system introduced by Labour. That’s not £10 billion from the whole benefits system but just one part. As a result, IDS says, the tax credit system is "not fit for purpose".In fact the benefits system is quite inefficient - not because it wastes money but because it pays out far too little.It’s an interesting claim for a number of reasons.First of all, to come up with a big enough figure to make a headline, Iain Duncan Smith had to spread his calculations over a period of seven years from 2003 to 2010.And according to latest data on the error rate in the benefits system as a whole the cost of fraud is no more than 0.7% a year. In 2011/12 that meant £1.2 billion was paid because of fraudulent claims. And given that this fraud rate has been remarkably consistent over time, it also implies that in total fraud might have cost over all benefits, including the old age pension, just £7.6 billion during the Labour years to which Duncan Smith referred.Errors might add another £5.4bn meaning a total of £13billion incorrectly paid out from a total benefit spend of £1,089 billion.On this basis Mr Duncan Smith’s claims about one part of the system (tax credits account for about 15% of the total cost of the benefits) simply do not stack up.What is quite staggering is how little has been lost to fraud, not how much. Any system administered by humans or computers will make mistakes, and for an issue as challenging as benefits the error rate is tiny.In fact the benefits system is quite inefficient - not because it wastes money but because it pays out far too little to people who are entitled to claim but for one reason or another do not.Now, bearing that in mind, let’s have a look at the tax system.HM Revenue & Customs admit that tax fraud and error costs at least £23 billion a year. This figure is pure conjecture and there are many indications that it is a massive underestimate. My calculations suggest tax fraud in the UK is costing around £70 billion a year.Now we can disagree about whether the right number is £23 billion of £70 billion or somewhere in between, but however it is looked at, the impact of tax fraud is many, many times bigger than the £1.2 billion that benefit fraud will cost in total this year.And the government aren’t interested in looking at it ironically because they are fixated on cost savings at the Revenue, which has lost tens of thousands of staff in recent years. This is actually depriving the Treasury of much-needed cash and it is hurting honest businesses who are being forced to the wall by rivals happy to cheat.Iain Duncan Smith’s political attempts to malign the benefits system so that he can replace it with his universal credit are distracting from genuine issues that are undermining the economy and the national finances.The government are tackling the wrong issue and they are doing it on purpose.Richard Murphy is an accountant, economist and director of Tax Research LLP. You can find him on Twitter@RichardJMurphy.Share280Share1.9K< Back to #socialvoices