HMRC’s estimate of the tax gap includes both non-compliance with the letter of the law, such as tax evasion, and non-compliance with the spirit of the law, such as tax avoidance.22 We asked the Department the extent to which the practice of ‘base erosion and profit shifting’ is captured in HMRC’s estimates of the tax gap. These are arrangements by which multinational companies are able to, via financial transactions, shift their profits to countries where the tax rates are lower than the country where the profits were generated. HMRC explained that the tax gap is a measure of non-compliance with the UK tax law, and it therefore includes the costs to the Exchequer of multinationals shifting their profits in breach of the UK tax law. It acknowledged, however, that tackling this risk to ensure companies pay more of their fair share of tax to the right jurisdictions requires the reform of international rules. The Organisation for Economic Co-operation and Development is taking the lead in this area.23