Up to £31.6bn tax 'lost to black economy in cigarettes, alcohol and diesel'

Up to £31.6 billion of tax revenue has been lost to the black economy in cigarettes, alcohol and diesel, over the past five years, according to analysis by a campaign group.

The TaxPayers' Alliance said the shortfall is so big it could fund a 1.5p cut in the basic rate of income tax.

Up to £13.9bn was lost to the illicit trade in cigarettes and as much as £4.8bn was lost in the illegal trade in diesel from 2010 to 2015, according to the group's analysis of HMRC figures.

The taxman lost out on £5.8bn on beer, £3.6bn on spirits, and £3.5bn on wine over the same period, the TaxPayers' Alliance said.

The group arrived at its figures by taking the upper estimate of the amount of tax HMRC says it has lost to the black market over the last five years.

John O'Connell, chief executive of the TaxPayers' Alliance, said: "Our ludicrously complicated, punitive tax system not only hits hard-pressed families with crippling bills but also affects frontline services by depriving the Treasury of revenue lost to the black market, all the while lining the pockets of those peddling dodgy tobacco, alcohol and diesel.

"The revenue lost to the illicit trade could fund a modest but much-needed tax cut for millions of families while preventing smugglers from profiting because of deeply regressive 'sin taxes' which hit the poorest hardest.

"It is high time the Government offered struggling taxpayers a better deal instead of kowtowing to the self-appointed lifestyle police who remain oblivious to the cost of ever-rising duties on ordinary taxpayers."

But HMRC has said the UK's tax gap - the difference between the amount due and the amount collected - is one of the lowest in the world.