Revenue writes off £1.5bn of tax

More than £1.5bn in tax is being written off by the Inland Revenue, mainly because people cannot afford to pay. Figures released today show that the amount of tax the Revenue has given up hope of collecting has tripled since 1989-90 to £1.58bn in 1993-94.

Of that, 76 per cent was due to hardship and insolvency; 9 per cent was caused by people being at unknown addresses or going abroad; and12 per cent was deemed not worth pursuing.

Sir John Bourn, the Comptroller and Auditor-General, who published the figures as part of his annual examination of the Revenue's accounts, said the rise "is clearly connected with the recession". He noted that the number of company liquidations and bankruptcies in England and Wales had soared from just under 20,000 in 1989-90 to over 57,000 in 1993-94.

Although the write-off total is less than in1992-93, that year was artificially inflated by a few big cases. "There continues, therefore, to be an upward underlying trend," Sir John said.

So seriously does the Revenue take the overall increase that it is urgently checking that mistakes are not being made and tax inspectors are not being too generous in their calculations.

"We're conducting an internal audit to see our procedures are working properly," a Revenue spokesman said.

Sir John, who heads the National Audit Office, the public finance watchdog, also disclosed that "bootlegging" - people bringing in cases of alcohol and tobacco from Channel ports and selling it here without paying duty or VAT - is hitting the Exchequer hard.

The Revenue estimated the loss in 1993-94 to be £35m, of which over half came from "roll your own" tobacco.

But, Sir John said, he was sure that figure, which was based on a detection rate of 5 per cent, was far too low.