3. Tax gaps: Excise (including alcohol, tobacco and oils)
Updated 20 June 2024
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This publication is available at https://www.gov.uk/government/statistics/measuring-tax-gaps/3-tax-gaps-excise-including-alcohol-tobacco-and-oils
Summary
The excise duties gap estimate is the sum of 5 components:
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the beer duty gap, based on an established top-down and an established bottom-up methodology, using survey data and HMRC management information
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the spirits duty gap, based on an established top-down methodology which uses survey data to estimate the total market size and takes away the amount actually cleared (the amount of duty received by HMRC)
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the tobacco duty gap, which includes cigarettes and hand-rolling tobacco duty gaps, both based on a top-down methodology which estimates the total market size for each tobacco product and then takes away the amount actually cleared
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the hydrocarbon oils (fuel duty) gap, based on an established top-down methodology using fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology using random enquiry programme data for the use of illicit diesel from 2016 to 2017 onwards
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other excise duties, including betting and gaming, cider and perry, spirits-based ready-to-drinks and wine, based on an experimental method using a weighted average from similar taxes
To evaluate the uncertainty of our excise duties gap, we assign an uncertainty rating for each component, ranging from ‘very low’ to ‘very high’. The estimates for beer, spirits, cigarette and hand-rolling tobacco duty gaps have ‘high’ uncertainty. Hydrocarbon oils duty gap has ‘medium’ uncertainty and other excise duties gaps have ‘very high’ uncertainty.
Main findings
Figure 3.1 shows the excise duties gap time-series in absolute terms and relative to excise duties theoretical liabilities.
The excise duties gap is 4.7% of the overall excise duties theoretical liability, or £2.5 billion in absolute terms, in the 2022 to 2023 tax year.
There has been a gradual reduction in the excise duties gap from 8.3% in 2005 to 2006 to 4.7% in 2022 to 2023. Between 2005 to 2006 and 2011 to 2012 the excise duties gap followed a downward trend, declining from 8.3% to 5.0%. Since then, the excise duties gap has flucated and decreased to 4.7% in 2022 to 2023.
Figure 3.1: excise duties gap by value and as a percentage of theoretical liabilities, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.1
- The full data series can be seen in the online tables.
Figure 3.2 shows the time-series for the excise duties gap components: beer, spirits, tobacco, hydrocarbon oils and other excise duties gaps.
The estimate for the tobacco duty gap as a proportion of theoretical liabilities is broadly the highest compared to the other components across the time series, at 21.7% in 2005 to 2006, falling to 14.5% in 2022 to 2023.
The second largest excise duties gap is the beer duty gap which, whilst showing some year-on-year volatility, has reduced from 9.6% in 2007 to 2008 to 8.7% in 2022 to 2023. It reached a high of 19.3% in 2020 to 2021, followed by a large decline in 2021 to 2022.
The hydrocarbon oils duty gap is the lowest amongst the excise duties gap components. Falling from 2.8% in 2005 to 2006 to 0.2% in 2022 to 2023. The estimate for the hydrocarbon oils duty gap has been relatively low at below 1.0% since 2011 to 2012.
The estimate for the spirits duty gap, whilst showing some year-on-year volatility, has generally been declining from 6.4% in 2005 to 2006 to 1.5 % in 2022 to 2023. The most recent peak in the spirits duty gap was 10.6% in 2013 to 2014.
The estimate for the other excise duties gap has gradually decreased from 8.0% in 2005 to 2006 to 4.4% in 2022 to 2023 although there is volatility across the time series. There was a peak in the other excise duties gap of 11.8% in 2013 to 2014.
Figure 3.2: excise duties gap as a percentage of theoretical liabilities by component
Notes for Figure 3.2
- The full data series can be seen in the online tables.
Beer
Main findings
The beer duty gap is estimated using both an established top-down and bottom-up methodology which generate upper and lower bound estimates. The implied central estimate is an average of these 2 estimates and is intended to be an indicator of the long-term trend.
Figure 3.3 shows the beer duty gap time-series in absolute terms and relative to beer duty theoretical liabilities.
The beer duty gap is 8.7% of the theoretical beer duty liability, or £0.3 billion in absolute terms, in the 2022 to 2023 tax year.
The beer duty gap estimate as a proportion of total theoretical beer duty liability gradually increased from 9.6% in 2007 to 2008 reaching a high of 19.3% in 2020 to 2021, followed by declines to 11.4% in 2021 to 2022 and 8.7% in 2022 to 2023.
The beer duty gap is partially projected from 2016 to 2017.
Figure 3.3: Beer duty gap by value and as a percentage of theoretical liability, 2007 to 2008 up to 2022 to 2023
Notes for Figure 3.3
- The full data series can be seen in the online tables.
Figure 3.4 shows the beer duty gap, liability, and the theoretical liability, which is the sum of the duty gap and liability, since 2018 to 2019.
The beer duty gap has varied between £0.3 and £0.7 billion in the last 5 years. Beer duty liability declined to £3.1 billion in 2020 to 2021, followed by an increase to £3.7 billion in 2022 to 2023. Total theoretical beer liability has reduced over the last 5 years from £4.4 billion in 2018 to 2019 to £4.0 billion in 2022 to 2023.
Figure 3.4: Beer duty gap, liability and theoretical liability, since 2018 to 2019 (£ billion)
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 0.7 | 3.7 | 4.4 |
| 2019-20 | 0.7 | 3.4 | 4.1 |
| 2020-21 | 0.7 | 3.1 | 3.8 |
| 2021-22 | 0.5 | 3.7 | 4.2 |
| 2022-23 | 0.3 | 3.7 | 4.0 |
Notes for Figure 3.4
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the beer duty gap is the beer VAT gap. The VAT gap arising from undeclared beer is captured within the overall VAT gap covered in chapter 2. Figure 3.5 shows the VAT gap arising from undeclared beer duty since 2018 to 2019 .
The beer VAT gap has reduced from £0.4 billion to £0.2 billion in the last 5 years.
Figure 3.5: VAT gap arising from undeclared beer since 2018 to 2019 (£ billion)
| Year | VAT gap |
|---|---|
| 2018-19 | 0.4 |
| 2019-20 | 0.3 |
| 2020-21 | 0.4 |
| 2021-22 | 0.3 |
| 2022-23 | 0.2 |
Notes for Figure 3.5
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion.
-
Figures are included in the VAT gap estimate.
Revisions
Figure 3.6 shows the revisions to the beer duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
There are no revisions to the beer duty gap this year.
Figure 3.6: Revisions to beer duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.6
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Spirits
Main findings
Figure 3.7 shows the spirits duty gap time-series in absolute terms and as a percentage of spirits duty theoretical liability.
The spirits duty gap is 1.5% of the theoretical spirits duty liability, or £0.1 billion in absolute terms, in the 2022 to 2023 tax year.
There is high year-on-year volatility in the estimated spirits duty gap. The spirits duty gap estimate as a proportion of theoretical spirits duty liabilities has decreased from 6.4% in 2005 to 2006 to 1.5% in 2022 to 2023. The spirits duty gap peaked at 10.6% in 2013 to 2014 after which it has followed a steady downward trend.
The spirits duty gap estimate is projected from 2020 to 2021 based on a constant illicit market percentage estimate.
Figure 3.7: Spirits duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.7
- The full data series can be seen in the online tables.
Figure 3.8 shows the spirits duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2018 to 2019.
The spirits duty gap has decreased from £110 million to £60 million over the last 5 years. The spirits liabilities have increased from £3.8 billion to £4.1 billion.
Figure 3.8: Spirits duty gap, liability and theoretical liability, since 2018 to 2019 (£ million)
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 110 | 3,800 | 3,900 |
| 2019-20 | 70 | 3,800 | 3,900 |
| 2020-21 | 70 | 4,100 | 4,200 |
| 2021-22 | 60 | 4,400 | 4,500 |
| 2022-23 | 60 | 4,100 | 4,200 |
Notes for Figure 3.8
-
The full data series can be seen in the online tables.
-
Figures for the net tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the spirits duty gap is the spirits VAT gap. The VAT gap arising from undeclared spirits is captured within the overall VAT gap covered in chapter 2.
Figure 3.9 shows the VAT gap arising from undeclared spirits since 2018 to 2019.
The spirits VAT gap has generally been decreasing in the last 5 years, from £70 million in 2018 to 2019 to £40 million in 2022 to 2023.
Figure 3.9: VAT gap arising from undeclared spirits, since 2018 to 2019 (£ million)
| Year | VAT gap |
|---|---|
| 2018-19 | 70 |
| 2019-20 | 40 |
| 2020-21 | 30 |
| 2021-22 | 40 |
| 2022-23 | 40 |
Notes for Figure 3.9
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £10 million.
-
Figures are included in the VAT gap estimate.
Revisions
Figure 3.10 shows the revisions to the spirits duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
There are very small revisions due to updated data on spirits on-licence and off-licence prices. Spirits price data is supplied by the Office for National Statistics and is used to convert the household expenditure figures to spirits market size figures.
Figure 3.10: Revisions to spirits duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.10
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Tobacco
Main findings
The tobacco duty gap is calculated by summing the duty gaps for cigarettes and hand-rolling tobacco.
Both the cigarettes and hand-rolling tobacco duty gaps are each estimated using an established top-down methodology to estimate upper and lower duty gaps estimates, which are then averaged to obtain a central estimate for each.
Figure 3.11 shows the tobacco duty gap time-series in absolute terms and as a percentage of theoretical tobacco duty liability.
The duty gap for tobacco duty is 14.5% of the theoretical tobacco duty liability, or £1.7 billion in absolute terms, in tax year 2022 to 2023.
There has been a reduction in the tobacco duty gap estimate as a proportion of total theoretical tobacco duty liabilities, from 21.7% in 2005 to 2006 to 14.5% in 2022 to 2023. Between 2005 to 2006 and 2014 to 2015, the tobacco duty gap declined, reaching a low of 12.1% in 2014 to 2015. Since 2014 to 2015 the tobacco duty gap series has broadly remained stable.
Both the cigarette and hand-rolling tobacco duty gap estimates from 2020 to 2021 are projected based on the 2019 to 2020 estimate of the illicit market. This is due to the removal of tobacco consumption questions from the Office for National Statistics’ Opinion and Lifestyle Survey from 2020 to 2021 to 2022 to 2023.
Figure 3.11: Tobacco duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.11
- The full data series can be seen in the online tables.
Figure 3.12 shows the tobacco duty gap, duty liability, and the theoretical tobacco duty liability, which is the sum of the duty gap and duty liability, since 2018 to 2019.
The tobacco duty gap has been broadly stable between £1.6 billion and £1.8 billion in the last 5 years. The tobacco duty liability has increased from £9.3 billion to £10.0 billion in the last 5 years. The total theoretical tobacco liability has generally been increasing over the last 5 years from £10.8 billion to £11.7 billion.
Figure 3.12: Tobacco duty gap, tax liability and theoretical tax liability (£ billion), since 2018 to 2019
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 1.6 | 9.3 | 10.8 |
| 2019-20 | 1.6 | 8.8 | 10.4 |
| 2020-21 | 1.7 | 10.0 | 11.7 |
| 2021-22 | 1.8 | 10.3 | 12.0 |
| 2022-23 | 1.7 | 10.0 | 11.7 |
Notes for Figure 3.12
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the tobacco duty gap is the tobacco VAT gap. The VAT gap arising from undeclared tobacco duty is captured within the overall VAT gap covered in chapter 2.
Figure 3.13 shows the VAT gap arising from undeclared tobacco since 2018 to 2019.
The tobacco VAT gap has been broadly stable between £0.4 billion and £0.5 billion in the last 5 years.
Figure 3.13: VAT gap arising from undeclared tobacco (£ billion), since 2018 to 2019
| Year | VAT gap |
|---|---|
| 2018-19 | 0.4 |
| 2019-20 | 0.5 |
| 2020-21 | 0.5 |
| 2021-22 | 0.5 |
| 2022-23 | 0.5 |
Notes for Figure 3.13
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion.
-
Figures are included in the VAT gap estimate.
Figure 3.14 shows the time-series for the tobacco duty gap and its 2 components as a percentage of theoretical duty liability.
The trend in the tobacco gap is largely driven by the trend in the cigarette duty gap, which makes up most of the tobacco consumption and tax receipts. The hand-rolling tobacco duty gap has decreased from 65.2% in 2005 to 2006 to 33.3% in 2022 to 2023 and is higher than the cigarettes duty gap over the time-series.
Figure 3.14: Tobacco duty gap as a percentage of total theoretical duty liability by component, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.14
-
The full data series can be seen in the online tables.
-
HRT stands for ‘Hand-rolling tobacco’.
Revisions
Figure 3.15 shows the revisions to the tobacco duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
The estimate of the tobacco duty gap is revised downwards from 2019 to 2020 due to updated data on under-declaration of tobacco consumption from NHS Digital’s Health Survey England.
Figure 3.15: Revisions to tobacco duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.15
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Cigarettes
Main findings
Figure 3.16 shows the cigarettes duty gap time-series in absolute terms and relative to theoretical cigarettes duty liability.
The cigarettes duty gap is 6.9% of the theoretical cigarettes duty liability, or £0.6 billion in absolute terms, in tax year 2022 to 2023.
There has been a reduction in the cigarettes duty gap estimate as a proportion of theoretical cigarettes duty liability, from 16.9% in tax year 2005 to 2006 to 6.9% in tax year 2022 to 2023.
Figure 3.16: Cigarettes duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.16
- The full data series can be seen in the online tables.
Figure 3.17 shows the cigarettes duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2005 to 2006.
The cigarettes duty gap has decreased from £1.1 billion to £0.6 billion in the last 5 years. The cigarettes duty liability has been broadly stable between £7.3 billion and £7.8 billion over the last 5 years. The cigarettes total theoretical liability has decreased from £8.9 billion to £8.3 billion over the last 5 years.
Figure 3.17: Cigarettes duty gap, tax liability and theoretical tax liability (£ billion), since 2018 to 2019
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 1.1 | 7.8 | 8.9 |
| 2019-20 | 0.7 | 7.3 | 7.9 |
| 2020-21 | 0.6 | 7.7 | 8.3 |
| 2021-22 | 0.6 | 7.8 | 8.5 |
| 2022-23 | 0.6 | 7.7 | 8.3 |
Notes for Figure 3.17
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the cigarettes duty gap is the cigarettes VAT gap. The VAT gap arising from undeclared cigarettes duty is captured within the overall VAT gap covered in chapter 2.
Figure 3.18 shows the VAT gap arising from undeclared cigarettes since 2018 to 2019 .
The cigarettes VAT gap has decreased from £0.3 billion in 2018 to 2019 to £0.1 billion in 2022 to 2023.
Figure 3.18: VAT gap arising from undeclared cigarettes (£ billion), since 2018 to 2019
| Year | VAT gap |
|---|---|
| 2018-19 | 0.3 |
| 2019-20 | 0.2 |
| 2020-21 | 0.1 |
| 2021-22 | 0.1 |
| 2022-23 | 0.1 |
Notes for Figure 3.18
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion.
-
Figures are included in the VAT gap estimate.
Revisions
Figure 3.19 shows the revisions to the cigarette duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
As noted above, the cigarettes duty gap is revised downwards from 2019 to 2020, due to updated data on under-declaration of tobacco consumption from NHS Digital’s Health Survey England.
Figure 3.19: Revisions to cigarettes duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.19
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Hand-rolling tobacco (HRT)
Main findings
Figure 3.20 shows the hand-rolling tobacco duty gap time-series in absolute terms and relative to theoretical hand-rolling tobacco duty liability.
The hand-rolling tobacco duty gap is 33.3% of the theoretical hand-rolling tobacco duty liability, or £1.1 billion in absolute terms, in the 2022 to 2023 tax year.
There has been a reduction in the hand-rolling tobacco duty gap as a proportion of theoretical tobacco duty liability, from 65.2% in 2005 to 2006 to 33.3% in 2022 to 2023. Between 2005 to 2006 and 2018 to 2019, the hand-rolling tobacco duty gap declined, reaching a low of 24.7% in 2018 to 2019. Since 2019 to 2020 the tobacco duty gap has been broadly stable.
Figure 3.20: Hand-rolling tobacco duty gap by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.20
- The full data series can be seen in the online tables.
Figure 3.21 shows the hand-rolling tobacco duty gap, duty liability and theoretical duty liability since 2018 to 2019.
The duty gap has increased from £0.5 billion in 2018 to 2019 to £1.1 billion in 2022 to 2023. The hand-rolling tobacco duty liability has increased from £1.5 billion to £2.3 billion, and the theoretical duty from £1.9 billion to £3.4 billion in the last 5 years.
Figure 3.21: Hand-rolling tobacco duty gap, duty liability and theoretical duty liability (£ billion), since 2018 to 2019
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 0.5 | 1.5 | 1.9 |
| 2019-20 | 0.9 | 1.5 | 2.5 |
| 2020-21 | 1.2 | 2.2 | 3.4 |
| 2021-22 | 1.1 | 2.4 | 3.6 |
| 2022-23 | 1.1 | 2.3 | 3.4 |
Notes for Figure 3.21
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the hand-rolling tobacco duty gap is the hand-rolling tobacco VAT gap. The VAT gap arising from hand-rolling tobacco is captured within the overall VAT gap covered in chapter 2.
Figure 3.22 shows the VAT gap arising from undeclared hand-rolling tobacco since 2018 to 2019 .
The hand-rolling tobacco VAT gap has increased from £0.2 billion in 2018 to 2019 to £0.4 billion in 2022 to 2023.
Figure 3.22: VAT gap arising from undeclared hand-rolling tobacco (£ billion), since 2018 to 2019
| Year | VAT gap |
|---|---|
| 2018-19 | 0.2 |
| 2019-20 | 0.3 |
| 2020-21 | 0.4 |
| 2021-22 | 0.4 |
| 2022-23 | 0.4 |
Notes for Figure 3.22
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £0.1 billion.
-
Figures are included in the VAT gap estimate.
Revisions
Figure 3.23 shows the revisions to the hand-rolling tobacco duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
As noted above, the hand-rolling tobacco duty gap is revised downwards from 2019 to 2020, due to updated data on under declaration of tobacco consumption in NHS Digital’s Health Survey England.
Figure 3.23: Revisions to hand-rolling tobacco duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.23
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Hydrocarbon oils (fuel duty)
Main findings
The hydrocarbon oils duty gap is estimated using an established top-down methodology based on fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology based on random enquiry programme data for the use of illicit diesel from 2016 to 2017 onwards. Therefore, figures from 2016 to 2017 are not directly comparable to previous years.
The misuse of other fuels (for example, petrol) has been excluded on the basis that this is believed to be negligible, the scale of which is not currently quantifiable.
Other fuel duties do however form a part of theoretical hydrocarbon oils duty liability.
Figure 3.24 shows the hydrocarbon oils duty gap time-series in absolute terms and relative to theoretical hydrocarbon oils duty liability.
The hydrocarbon oils duty gap is 0.2% of the theoretical hydrocarbon oils duty liability, or £50 million in absolute terms, in the 2022 to 2023 tax year.
There has been a reduction in the hydrocarbon oils duty gap from 2.8% in 2005 to 2006 to 0.2% in 2022 to 2023. There was a large year-on-year decline from 2.7% in 2009 to 2010 to 1.3% in 2010 to 2011 and 0.6% in 2011 to 2012. It has remained broadly stable, between 0.2% and 0.5%, since 2012 to 2013.
Figure 3.24: Hydrocarbon oils duty gap (£ million) by value and as a percentage of theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.24
- The full data series can be seen in the online tables.
Figure 3.25 shows the hydrocarbon oils duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2018 to 2019.
The hydrocarbon oils duty gap has decreased from £140 million in 2018 to 2019 to £50 million in 2022 to 2023, whilst hydrocarbon oils duty liability has decreased from around £28.0 billion in 2018 to 2019 to £25.1 billion in 2022 to 2023. The total theoretical hydrocarbon oils duty liability decreased from around £28.1 billion in 2018 to 2019 to £25.1 billion in 2022 to 2023.
Figure 3.25: Hydrocarbon oils duty gap, tax liability and theoretical tax liability (£ million), since 2018 to 2019
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 140 | 28,000 | 28,100 |
| 2019-20 | 150 | 27,600 | 27,700 |
| 2020-21 | 120 | 20,900 | 21,000 |
| 2021-22 | 140 | 25,900 | 26,100 |
| 2022-23 | 50 | 25,100 | 25,100 |
Notes for Figure 3.25
-
The full data series can be seen in the online tables.
-
Figures for the net tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the hydrocarbon oils duty gap is the hydrocarbon oils VAT gap. The VAT gap arising from undeclared hydrocarbon oils duty is captured within the overall VAT gap covered in chapter 2.
Figure 3.26 shows the VAT gap arising from undeclared hydrocarbon oils since 2018 to 2019 .
The VAT gap arising from undeclared hydrocarbon oils has decreased from £40 million in 2018 to 2019 to £10 million in 2022 to 2023.
Figure 3.26: VAT gap arising from undeclared hydrocarbon oils (£ million), since 2018 to 2019
| Year | VAT gap |
|---|---|
| 2018-19 | 40 |
| 2019-20 | 40 |
| 2020-21 | 30 |
| 2021-22 | 40 |
| 2022-23 | 10 |
Notes for Figure 3.26
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £10 million.
-
Figures are included in the VAT gap estimate
Diesel
Main findings
The diesel duty gap is estimated using an established top-down methodology based on fuel consumption data between tax years 2005 to 2006 and 2015 to 2016, and an established bottom-up methodology based on random enquiry programme data for the use of illicit diesel from 2016 to 2017 onwards. Therefore, figures from 2016 to 2017 are not directly comparable to previous years.
Figure 3.27 shows the diesel duty gap time-series in absolute terms and relative to theoretical diesel liabilities.
The diesel duty gap is 0.3% of the theoretical diesel duty liability, or £50 million in absolute terms, in the 2022 to 2023 tax year.
There has been a reduction in the diesel duty gap from 5.7% in 2005 to 2006 to 0.3% in 2022 to 2023. There was a large year-on-year decline from 5.1% in 2009 to 2010 to 2.4% in 2010 to 2011 and 1.0% in 2011 to 2012. It has remained broadly stable, between 0.3% and 0.8%, since 2012 to 2013.
There has been a small increase in the diesel duty gap in 2016 to 2017 due to a step change from the top-down to bottom-up methodology, where it is broadly stable at 0.8% of theoretical duty liability from 2016 to 2017 to 2021 to 2022, before reducing to 0.3% in 2022 to 2023.
Figure 3.27: Diesel duty gap by value (£ million) and as a percentage of total theoretical duty liability, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.27
- The full data series can be seen in the online tables.
Figure 3.28 shows the diesel duty gap, duty liability, and the theoretical duty liability, which is the sum of the duty gap and duty liability, since 2018 to 2019.
The net diesel duty gap has decreased from £140 million in 2018 to 2019 to £50 million in 2022 to 2023, whilst diesel duty liabilities have decreased from £17.7 billion in 2018 to 2019 to £13.6 billion in 2020 to 2021, followed by an increase to £16.0 billion in the latest year. The total theoretical diesel duty liability decreased from £17.8 billion in 2018 to 2019 to £13.7 billion in 2020 to 2021, followed by an increase to £16.1 billion in the latest year.
Figure 3.28: Diesel duty gap, tax liability and theoretical tax liability (£ million), since 2018 to 2019
| Year | Net duty gap | Duty liability | Total theoretical duty liability |
|---|---|---|---|
| 2018-19 | 140 | 17,700 | 17,800 |
| 2019-20 | 150 | 17,300 | 17,400 |
| 2020-21 | 120 | 13,600 | 13,700 |
| 2021-22 | 140 | 16,100 | 16,300 |
| 2022-23 | 50 | 16,000 | 16,100 |
Notes for Figure 3.28
-
The full data series can be seen in the online tables.
-
Figures for the net tax gap are rounded to the nearest £10 million while the liability is rounded to the nearest £100 million. As a result, components may not appear to sum.
-
Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.
Additional to the diesel duty gap is the diesel VAT gap. The VAT gap arising from undeclared diesel is captured within the overall VAT gap covered in chapter 2.
Figure 3.29 shows the VAT gap arising from undeclared diesel since 2018 to 2019.
The VAT gap arising from undeclared diesel has decreased from £40 million in 2018 to 2019 to £10 million in 2022 to 2023.
Figure 3.29: VAT gap arising from undeclared diesel (£ million), since 2018 to 2019
| Year | VAT gap |
|---|---|
| 2018-19 | 40 |
| 2019-20 | 40 |
| 2020-21 | 30 |
| 2021-22 | 40 |
| 2022-23 | 10 |
Notes for Figure 3.29
-
The full data series can be seen in the online tables.
-
Figures are rounded to the nearest £10 million.
-
Figures are included in the VAT gap estimate.
Revisions
Figure 3.30 shows the revisions to the diesel duty gap since the publication of the ‘Measuring tax gaps 2023 edition’.
There are no revisions to the diesel duty gap.
Figure 3.30: Revisions to diesel duty gap since the ‘Measuring tax gaps 2023 edition’
Notes for Figure 3.30
-
The full data series can be seen in the online tables.
-
MTG stands for ‘Measuring tax gaps’.
Petrol
The petrol duty gap is assumed to be zero due to low demand from commercial sectors and the highly flammable nature of the product.
Other excise duties
Main findings
The other excise duties gap captures the duty gaps of excise duties that do not currently have standalone models in the ‘Measuring tax gaps’ publication; namely betting and gaming, cider and perry, spirits-based ready-to-drink beverages and wine duties gaps.
Limitations in data or methods available means it is difficult to estimate these components individually, which is why an aggregated estimate is produced under ‘other excise duties’.
The other excise duties gap is based on an experimental method, whereby a proxy indicator for the scale of revenue losses across other excise duties has been produced by estimating the weighted average percentage of tax gaps for similar taxes each year and multiplying this by theoretical tax duty liabilities.
The average percentage revenue losses should not be considered estimates of the true percentage losses across betting and gaming, cider and perry, spirits-based ready-to-drink beverages and wine duties, as this is unknown. Many of these taxes are very different from one another in nature and are therefore subject to different rules. The true other excise duties gaps are therefore likely to vary across the duties.
Figure 3.31 shows the other excise duties gap time-series in absolute terms and relative to other excise duties theoretical liabilities.
The other excise duties gap is 4.4% of the theoretical other excise duties liabilities, or £0.4 billion in absolute terms, in the 2022 to 2023 tax year.
There has been a reduction in the other excise duties gap between the tax years 2005 to 2006 and 2022 to 2023 from 8.0% to 4.4% of theoretical liabilities.
Figure 3.31: Other excise duties gap by value (£ billion) and as a percentage of theoretical duty liabilities, 2005 to 2006 up to 2022 to 2023
Notes for Figure 3.31
- The full data series can be seen in the online tables.
Figure 3.32 shows the other excise duties gap, duty liability, and the total theoretical duty liability, which is the sum of the duty gap and duty liability, since 2018 to 2019.
The other excise duties gap has decreased from £0.7 billion in 2018 to 2019 to £0.4 billion in 2022 to 2023, whilst other excise duties liability has remained broadly stable between£7.6 billion and £8.0 billion over the last 5 years. The total theoretical other excise duties liability remained broadly stable between £8.2 billion and £8.5 billion over the last 5 years.
Figure 3.32: Other excise duties gap, duties liabilities and total theoretical duties liabilities (£ billion), since 2018 to 2019
| Year | Net duties gap | Duties liability | Total theoretical duties liability |
|---|---|---|---|
| 2018-19 | 0.7 | 7.7 | 8.4 |
| 2019-20 | 0.6 | 7.6 | 8.2 |
| 2020-21 | 0.7 | 7.7 | 8.5 |
| 2021-22 | 0.5 | 8.0 | 8.5 |
| 2022-23 | 0.4 | 7.9 | 8.3 |
Notes for Figure 3.32
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The full data series can be seen in the online tables.
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Figures are rounded to the nearest £0.1 billion. As a result, components may not appear to sum.
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Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.