TPA data shows government is failing to collect billions of pounds in tax(Image: Getty Images)

The government has failed to collect billions of pounds in tax at a time when its spending cuts are hitting many households hard, new figures show.

According to the Taxpayers' Alliance (TPA), a massive £27.4 billion has not been collected by the taxman in the last five years, equivalent to more than £1,000 per household.

In 2010/2011 alone, Her Majesty's Revenue and Customs (HMRC) missed out on £5.9 billion, the pressure group said. To put that into context, that sum would have made it possible to cut VAT by more than 1%.

TPA has claimed that errors on this scale could be avoided if the government simplified the tax code.

This lost revenue will be particularly galling to households who have been forced to sacrifice vital benefits as part of the government's austerity drive, aimed at bringing the burgeoning deficit under control.

In fact, it has been claimed that some households will lose an average of £10,000 by 2015.

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Why isn't the money collected?
Massive amounts of tax revenue are not collected as a result of remissions and write-offs.

Remissions are debts that are capable of recovery but the HMRC has decided not to pursue the liability, for example, on the grounds of value for money or official error, explained TPA.

Meanwhile, write-offs are debts that are considered to be irrecoverable because there is no practical means of pursuing the liability, for example, if a firm has gone out of business.

The big increases in lost tax may in part be explained by recessionary pressures on individuals and businesses. However, a far simpler tax system could help to avoid errors of this scale in the future, and the public deficit could be reduced more quickly, argued TPA chief executive Matthew Elliott.

"It's ludicrous that our complex and unwieldy tax system means the taxman gives up on billions every year," he added.

"Taxes are a challenge to administer and a burden on families and we need systematic reform to produce a simpler tax code. Some of this uncollected tax will be down to the recession but there is clearly a long-term problem as well. Tax shouldn't be so taxing that even HMRC can't keep on top of it."

Do you find tax too complicated? Or do we just need the authorities to take a tighter grip on the money they're owed? Comment below to let us know your thoughts.

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Related links
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