The UK's $39 billion tax gap has left a 'financial black hole' for its already-battered economy

The UK's revenue department collected a total of 628 billion ($794 billion) in that year, making up about 95% of the tax expected by authorities.
But any impact from the Covid-19 outbreak on the tax gap will likely only be seen in 2020-21.
Adding to the economy's woes, "a financial black hole of 31 billion remains eye-watering by any standards," a senior analyst at AJ Bell said.
Visit Business Insider's homepage for more stories .

The gap between the amount of taxes expected and what was actually collected by the UK's Revenue and Customs department was 31 billion ($39 billion) for the year 2018-2019.

Although that seems like a massive number, it is actually a 15 year low in percentage terms, according to a report released Thursday by the Her Majesty's Revenue and Customs, the government department responsible for taxes in the UK.

The tax gap shockingly equals the amount spent on relief measures to stem an economic downturn from the coronavirus pandemic so far.

The estimate represents 4.7% of the UK's tax liabilities, which means that the HMRC collected 94.3% of all tax due between 2018 and 2019. In the previous year, the was around 5%.

A gap may arise from several reasons such as errors in simple calculation by taxpayers, legal interpretation, evasion, avoidance, and criminal attacks on the tax system.

"It is impossible to collect every penny of tax that is owed for example, we cannot collect outstanding tax from businesses that become insolvent," the department said in a statement.

Despite the UK securing its lowest recorded tax gap in percentage terms since comparable data started in 2005, it is still a huge cause of concern because of the country's grave current economic state.

Read More: The most accurate analyst covering e-commerce says these 7 stocks will be among the biggest winners of the shift to online shopping The UK's gross domestic product has declined by its largest amount in over 40 years amid the pandemic, and shrank by 20% in just one month alone. Adding to the economy's woes, "a financial black hole of 31 billion remains eye-watering by any standards," Tom Selby, senior analyst at AJ Bell, said in a note. Selby pointed out that the missing cash equates to the entire budget of Departments for Transport, and Business, Energy and Industrial Strategy (BEIS), and that the pandemic's strain on public finances would add greater pressure to close the tax gap in coming years. "These efforts will likely focus on people breaking or bending the rules to artificially reduce the amount of tax they pay," he said. "However, simplification of the rules individuals are required to navigate and efforts to further modernize the system of reporting could also go a long way to reducing tax errors." Read More: GOLDMAN SACHS: Wall Street is bracing for a historically wild stock market as the presidential election nears. Here's a surprising yet simple strategy for protecting your portfolio regardless of outcome. NOW WATCH: We tested a machine that brews beer at the push of a button See Also: US weekly jobless claims hit 1.3 million, less than economist forecasts A gauge of US service activity posts is biggest monthly jump since 1997 as the economy reopens These 6 charts from the June jobs report show how much the economy has recovered and how much further it has to go SEE ALSO: The world's richest people are getting more and more annoyed at how much it costs them to look after their money