I am occasionally making FoI requests now. I made one a few weeks ago when I anticipated the new tax gap report from HMRC coming out and asked three questions of relevance to this issue. The first was:
Is any estimate of those in the shadow economy included in the ONS data on the number in self-employment? If so, what method of calculation is used? What time series data is there for such estimates of such figures are included in the data? Please supply copies of all supporting information relating to such calculations.
The reply to this one was simple:
No. The LFS is unable to measure the shadow economy.
The LFS is the Labour Force Survey that is used for these purposes.
The second question was:
If those working in the shadow economy are not included in the ONS data for self-employment where are they included in the ONS labour statistics? What estimates of the number of those engaged in this way are available in time series data? How have such estimates been prepared? Please supply documentary evidence of the methodologies and calculations used.
Again the answer was pretty straightforward:
Those working in the 'shadow economy' are not estimated in the ONS labour market statistics and no time-series is available.
That is, hardly helpful, and means that the statistics are clearly distorted.
So, to move to the final question:
What proportion of the ONS estimate of GDP relates to the shadow economy? How is that estimate prepared? What time series data for this estimate is available? Can the data in question, and the basis on which it is calculated, be made available?
To which the answer is:
The latest estimates for the shadow economy relate to 2011 (published in Blue Book 2013), where the adjustment was £25.9 billion, which is approximately 1.7 per cent of GDP in current prices (not adjusted to remove the impact of inflation). There is no time series dataset available for this variable.
Three things follow from this. First of all such an estimate is ludicrously low: the HMRC data on missing VAT suggests that on average the VAT gap in the UK economy has been 12.2% over seven years. That makes it utterly impossible that the shadow economy can be just 1.7 percent of GDP. Broadly speaking I think the two gaps are likely to be of similar amount - not precisely, but similar.
The second is that this official connivance in this process of ignoring the shadow economy when it comes to tax is staggering. There is now such connivance when it comes to social security.
Last this says that the estimates of tax recoverable are fair - the GDP of this country is understated and therefore the potential for actual recovery of tax is real.
Now we need to do it.
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Presumably part of the VAT gap is traders becoming insolvent or disappearing without paying? Football Clubs alone must have cost the VATman a considerable amount, although probably the loss of PAYE would be even more. Hopefully the new PAYE system will help reduce the latter.
Bad debt is a small part – yes
But small, I stress
And underestimated
I’m not sure why it is impossible, so can you explain? UK VAT receipts are about £100bn. 12.2% tax gap implies £14bn of missing revenue. The shadow economy is £25.9bn which is higher, although you indicate they should be similar (for an unspecified reason) so why is the shadow economy estimate too low?
For heaven’s sake – the shadow economy is the value of the trade on which the VAT is not paid, not the VAT lost
And over such a large sample base if 12.2% VAT is lost that is likely to represent 12.2% of GDP unrfecorded
“These are essentials, or in central banker speak non-core items, which are rising in price which affects the poorest the most. So here is a driver of the food bank situation described above. Or to put it another way according to the Office for National Statistics, food inflation is running at 4.8%, energy inflation is running at 7.7% and water price inflation is running at 4.4% ”
http://www.mindfulmoney.co.uk/wp/shaun-richards/how-uk-food-bank-usage-increases-are-being-driven-by-inflation-and-falling-real-wages/
With gas going-up around 9% soon.