From the Tuberosa:
I would stress that this is the likely apportionment, in my opinion, within the UK. But as my evidence also suggests, the overall shadow economy in that country is approximately 10% at present. In those countries where the shadow economy is proportionately somewhat larger, and this is true for the vast majority of EU member states, so too might the proportion of VAT loss attributable to activity in the domestic shadow economy also be higher, in my opinion. I stress then that in my opinion when it comes to VAT fraud, important as international issues are, domestic tax gaps are now by far the most important issue of concern.
That pesky Laffer Curve, eh?
Tax as a portion of GDP is rather higher in most EU member states than it is in the UK. As Tuberosa tells us, they have rather larger tax dodging economies, thus more VAT going uncollected.
All we’re saying with Laffer is that at some point that dodging – in any and every form, from evasion through to working less or differently – outweighs the extra revenue from those not dodging.