U.K. Lawmakers Begin Probe Into $18 Billion of Missing VAT

(Bloomberg) -- U.K. lawmakers are starting inquiries into tax collection, avoidance and evasion after estimating the Treasury was unable to collect 12.6 billion pounds ($18 billion) of value-added tax in the 2015-16 fiscal year.

The Treasury Committee, which scrutinizes the work of the finance ministry and the Bank of England, said Tuesday it will examine the root causes of the VAT underpayment. It will also review the steps the Treasury has taken to address criticism about businesses and individuals dodging tax.

“There are concerns about the extent to which HMRC balances its responsibility to collect the right amount of tax due against its obligations to administer the tax system fairly and even-handedly,” said opposition Labour Party lawmaker John Mann, who is leading probes into evasion and avoidance and the competence of the U.K. tax authority to tackle the problem.

Chancellor of the Exchequer Philip Hammond started a consultation in March on how to better incorporate online shopping into the VAT system, since some businesses fail to charge the tax when they are supposed to on sales of goods to U.K. customers.

About 124 billion pounds of VAT was paid last year, more than a fifth of the total U.K. tax take. Lawmakers will examine why the levy is the second-largest component of missing taxes and look at the challenges and opportunities thrown up by Brexit in the effort to improve collection.

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