Hmm, well, you know

But let’s be clear: if, as I think, at least 10% of the UK economy is unrecorded (and this is what all peer-reviewed evidence suggests) and much of this is identified by non-recording consumption, then this cannot be done by the wealthy alone. They are wealthy, but they could not fail to record so much of what they spend without the active connivance of hundreds of thousands and quite likely millions of others who are in receipt of that spending and who would not declare it to HMRC. More plausibly, the non-recorded spend and non-recorded income is spread right across the economy and anyone with eyes to see and ears to hear knows that to be true. The builder, cleaner, coach, and trader taking unrecorded cash are all part of this problem, as are countless others. They are not wealthy. Many, I know, may just be trying to make ends meet. But they all break the law. And they all contribute to the tax gap. And they all undermine a fair tax system, and honest taxpayers.

Unless Labour acknowledges this it will allocate resources to the wrong issues when seeking tax justice.

And it will not direct enough resources to HMRC to put matters right.

It will also not ask the right questions about how to correct the income distribution.

If all the first is true then your estimates of the income distribution are wrong, aren’t they?

17 comments on “Hmm, well, you know

  1. He’s finally sort of seeing a bit of reality. Soon it might hit him that that 10% ‘unrecorded’ is actually *all* in the lower classes – the wealthy don’t *hide* their income, they don’t need to. They have accountants to guide them through minimizing their tax bill legally.

    Its the rest of us that can’t be arsed to record (and pay tax on) every transaction we do.

    But he is consistent – you can see in that quoted section the desire to get the boot on the neck of these lower class sofflaws.

  2. ‘It will also not ask the right questions about how to correct the income distribution.’

    What does that even mean?

  3. I know of one study which indicated 7% of tax credits was being lost to error and fraud. It involved 11% of claimants. ( The discrepancy is explained by some of their claim being legit ). The people operating at this level have low incomes naturally. As incomes increase I’ve no reason to believe fraud/error to increase, but Ritchie knows better. All the evidence is that it’s 10% plus.

  4. Imagine how much poorer these people would be if the government took 20% or more of what they are managing to get away with and live on. Much of that tax taken would be given away to foreigners, or to NGOs to agitate for even more tax. Personally I think the money is doing more good for the economy where it is.

  5. @Bongo

    Good point. I suspect the majority of tax evasion is committed by people also committing benefit fraud as income not declared for tax is similarly not declared for benefits.

    Ritchie and the Left never address this.

  6. More plausibly, the non-recorded spend and non-recorded income is spread right across the economy and anyone with eyes to see and ears to hear knows that to be true.

    First it is plausible. Then, magically, it is The Truth known by all. This migration happens in roughly 30 words.

    Amanduh Marcotte – even on her worst day – couldn’t write a more hilariously awful sentence.

    Perhaps he should take up poetry. Not a lot of tax justice poetry out there, as far as I know.

  7. Doh! and capt potato finally recognizes something that hmrc has known for years. Some years ago Whitehall made a study of the incomes and lifestyles of the self employed compared to a group of employees whose income they had data on (ie civil servants) The results were that on average self employed people enjoyed a 15% better lifestyle (size of houses etc) compared to civil servants on a comparable income, suggesting that self employed profits were understated by up to this amount. From my own personal experience with subcontractors in the construction industry this is as much to do with excessive and sometimes out right fraudulent expenses claims against income. This also has a knock on effect on tax credits. Don’t even talk about fraudulent childcare claims in tax credits.

  8. A fairly prosperous self-employed friend of mine got a tax bill amounting to some 15% of his income one year, and was ranting about it to a group of us.

    The wage-slaves present didn’t dare tell him what the wage-slave rate was. He might have had a heart attack on our behalf.

  9. The results were that on average self employed people enjoyed a 15% better lifestyle (size of houses etc) compared to civil servants on a comparable income

    Gross income? Were they obliged to pay comparable rates of tax? Different tax system for much of it, I imagine.

    Given the utter cluelessness civil servants have about the real world, the less than independent nature of the study and sprinkle a little middle-class disdain for the “artisan plebs” and you have a document which I wouldn’t exactly treat as gospel.

  10. Also, given the incompetence with which civil servants manage the State’s money, why should one believe they manage their own personal money any better?

  11. Also, given the incompetence with which civil servants manage the State’s money, why should one believe they manage their own personal money any better?

    That would be Milton Friedman’s “four ways to spend money”.

  12. @Jack C,

    On an income of just less than £50k, 15% seems about right, self-employed or not. (OK, to do it in my head I used next years tax allowance, and forgot where the change to the 40% rate comes in. The difference is in the ‘just less than’).

    Plus, being self-employed there are allowances you can claim quite genuinely that the wage slaves can’t – but then again, there are costs that the wage slaves don’t have.

    A major difference is in NI – but then the self-employed don’t get dole.

  13. EM,
    This was maybe 15 years ago or so. My overall deductions were 33% or more, and I’m pretty sure he was earning more than me.

    Besides, he was horrified by 15%. and wanted to know of any accountants that weren’t paid up members of the Stasi.

    Perhaps he’d been using Murphy.

  14. “A major difference is in NI – but then the self-employed don’t get dole.”

    Depends whether you consider all the employers NI is incident on the employee or not. Actual employee contributions are 12% vs self employed class 4 NIC at 9%.

    So for 3% less NIC we self employed get no dole, no holiday pay (28 days holiday plus 8 bank holidays equals 14% less hours worked per year for same pay) and no sick pay.

    Not the best deal IMO. Even if you assign all the employers NIC to the employee, the holiday pay benefit alone wipes that out, leaving the sick and welfare benefits costing them 3% of income. Plus a million and one employment rules that mean firing the lazy and incompetent is virtually impossible.

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