Non-detection multipliers for measuring tax gaps
This Working Paper explains HMRC’s plan to develop and implement new, UK-specific non-detection multipliers for use in estimating the tax gap.
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Please note that this is a technical paper that has been written for a specialist analytical audience and contains complex statistical terms.
Non-detection multipliers are used as part of the methodology to estimate the tax gap from audit data. The multiplier values are applied to audit results to account for non-compliance which is missed or not fully investigated in an audit.
They have been applied as part of the methodology for estimating the tax gap for direct taxes since HMRC first began publishing tax gap statistics.
The HMRC tax gaps team have conducted a review of different approaches to estimating non-detection multipliers, explored their application in international tax gap estimation, and tested out different approaches to see whether they can be applied in the UK.
We have selected an estimation method based on expert judgement as the most suitable approach and have implemented this for some of our new tax gap estimates in Measuring tax gaps 2020 edition. We plan to carry out a programme of development to introduce new non-detection multipliers in future editions of ‘Measuring tax gaps’.