By Becky Barrow

PUBLISHED: 18:24 EST, 23 May 2012 | UPDATED: 18:25 EST, 23 May 2012

The taxman is failing to collect more than 35billion a year from cheats who refuse to pay their taxes and others who find ways of avoiding them, a report from MPs will warn today.

It also found that job cuts at HM Revenue and Customs has resulted in 1billion of tax revenue not being tracked down.

The size of the country's so-called 'tax gap' will infuriate millions of honest taxpayers.

Hole: The country's 'tax gap' was 35billion last year after thousands avoided or simply refused paying taxes

Hole: The country's 'tax gap' was 35billion last year after thousands avoided or simply refused paying taxes

The tax gap is the difference between the amount of money collected by the tax authorities and the amount they should get if everybody paid the correct amount of tax.

The report from the Public Accounts Committee said an extra 35billion should have been collected in 2009/10 – equal to eight per cent of the total tax bill – if everybody had paid the correct amount.

In a further blow, it said the amount which is going missing as a result of 'error, avoidance and evasion' could be 'much greater'.

The report warns: 'It is clear that there is significant potential for additional tax revenue, which could help with the Government's deficit reduction programme.' 

It also raises doubts about the wisdom of slashing staff numbers.
Between 2006 and 2011, it says the department's compliance and enforcement division reduced staff numbers by 3,387 to 26,000.

Big difference: It also found that job cuts at HM Revenue and Customs has resulted in 1billion of tax revenue not being tracked down

Big difference: The report also found that job cuts at HM Revenue and Customs has resulted in 1billion of tax revenue not being tracked down

The report states: 'It has estimated that around 1.1billion of additional revenue could have been generated had these staff reductions not been made.'

For every 1 which has been saved, it has lost around 10 in tax revenue, it added.

An HMRC spokesman said: 'We will bring in an additional 7billion by 2014 through tackling abuse of the tax rules.'

Last year, the tax system was described as 'inefficient, overly complex and frequently unfair', following a study by the Institute for Fiscal Studies.

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

The comments below have been moderated in advance.

Wow, if all those tax cheats paid their taxes it would be easdy to bail outhe Greek tax cheats who refuse to repay their loans.

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How many MPs and pals on this list ?

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Sir, As long as HMRC have caught all the small fry one man bands, shop owners, pub landlords, plumbers, builders, chip shops, but leave foreign businesses alone don't want to offend them asking them to pay tax, and let the big earners get away because they all have houses abroad to maintain which are expensive, and have extravagant lifestyles.

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So they can work out how much they're missing in a month, but take 6 months on average to give me a rebate? Nice work HRMC

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Do we have a load of Greeks 'working' at the HMRC??

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So what, its a hole easily filled by starving old age pentioners to death. AH AH AH BOOOM BOOOM

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Well it night well be that people are becoming increasingly fed up by HMRC not paying back overpaid tax. All letters are ignored even recorded delivery attached to a cheque. The cheque is cashed, but the letter not replied to. I think that the reality is that HMRC owe much more than they are owed. Pot calling the kettle back comes to mind. In ten years I have received one notice of coding, and several incorrect bills. It seems that nobody in HMRC reads correspondence or else cannot comprehend it. Most would fail primary school arithmetic. Also using offensive form of address. You change the rules when it suits you so to do. Time HMRC was privatised, collections would soar, and people would pay the right money. When I get my state pension will be paid back in overall tax. Yes I paid in for forty years. Please HMRC pay your debts and answer your correspondence. You ignore all letters regarding refunds, but send out numerous demands for money not owed; WHY?

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They need to seriously sort this out, how can they admit that and do nothing about it? They need to be more the like the USA's IRS, they dont mess around and will take everything off you to repay the debt, and if that means your house, car or freedom then so be it. Theres a lot of good that could be done with 35 billion.

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Until the likes of Tony Blair and other politicians and the civil service bigwigs, are stopped from avoiding tax via the company loophole, then why should the rest of society carry the burden. Our whole governmental system needs an overhaul.

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Pay your tax when you spend your money not when you earn it, much harder to avoid your responsibilities.

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