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HMRC have successfully stepped up the manner in which they tackle tax avoidance, claims a new report.
However, there are still several improvements that could be made, says the study from the National Audit Office (NAO).
The investigation into the UK's so-called hidden economy focuses on the Revenue's work in dealing with businesses and individuals who avoid paying VAT, NICs and income tax.
It applauds HMRC for having 'made improvements in response to previous reports by the NAO and the Committee for Public Accounts and developed its methods'.
As a result, says the report, 'the department appears to be more effective, having achieved some success with new advertising and disclosure campaigns'.
And this has led to a rise in the number of tax avoidance prosecutions, with a 'return of around 4.5:1 on the £41 million [the Revenue] spent on all of its hidden economy work in 2006-07 [when 28,300 cases were uncovered]'.
In the four-year period to 2006-07, the amount of tax detected has increased in real terms by 13% to £145 million, claims NAO.
The office expects rates of success to increase 'as more recent initiatives reach their full effect'.
Nevertheless, there is still much room for more upgrading, believes the new report, entitled Tackling the Hidden Economy.
'The risk of being detected and the consequent penalties for non-compliance are relatively low,' it says, 'and there are opportunities to tackle [tax avoidance] more effectively'.
NAO recommends combining 'more extensive data matching with a programme of targeted advertising campaigns in risk areas… to encourage people into the formal economy'.
HMRC could also 'seek to change public attitudes to help reduce demand for hidden economy work and its social acceptability'.
The Revenue was buoyed by the latest NAO report.
A spokesperson commented: 'The hidden economy deprives the UK's public services of vital funding and places an additional burden on the majority of honest taxpayers who work within the law.
'We are pleased that the NAO report recognises that there has been real progress in tackling the hidden economy.
'HMRC focuses its compliance work on the activities and sectors that present the greatest risk, whilst making it as easy as possible for those who want to put their affairs on a proper footing to do so.'
The department then addressed the media's part in tackling tax avoidance.
'[They have] an important role to play in making those who are attracted by the hidden economy aware that this can have potentially serious consequences,' said the spokesperson.
'We will be looking at how the quality and extent of media coverage of these risks can be improved.'
