This is just lovely, isn’t it?
That’s their description of Corbynomics (although, only after they praise its motives). To reach their conclusions they say:
The £120 billion in missing tax revenues—which is about four times the government’s own estimate—comes from a report by Tax Research, a pressure group. Even if the figure is to be believed—which requires a leap of faith, since the report does not explain its calculations fully—Mr Corbyn’s proposed remedies are wanting. Britain already has one of the smallest shadow economies in the rich world; stopping cash-in-hand payments entirely is impossible (and even if it were not, the extra tax burden would crush some of the economic activity that generates this untaxed income). The Corbyn manifesto vaguely pledges “a proper anti-avoidance rule”.
I think they should read my report on this issue, which explains where every figure comes from, and a wide range of solutions. To be blunt, The Economist made its claims up. And that’s the kindest thing I can say about their claims.
So the Economist echoes (not because I said it, but just because it’s so damn obvious) something I’ve been saying for years. There always will be both a grey and black economy. And all one can do is reduce the size of it, not eliminate it. And Britain has done more than just about anyone else to do so: there’s not much more that can be done.
And, as I’ve also said, Ritchie is entirely ignoring the most basic thing we know about tax: taxing something means that we get less of it. And that applies in spades to that grey market activity. In very large part people are only partaking in the grey market simply because the tax wedge, if applied, would mean that no one would undertake that activity. The moment you start applying the full VAT whack plus income tax and double NI to window cleaning people stop doing it (purely as an example).
There just ain’t that £80 billion there to be captured, even if he is right about the size of the grey and black economies.
And do note how he entirely ignores the point that they actually make. Such a surprise, eh?