Ritchie still doesn’t understand tax, does he?

Let me ask you the more interesting question Frances

The BoE thinks there is a 10% shadow economy

HMRC say they lose at least 10% of VAT

How come in that case HMRC can say the maximum loss to evasion is £21 bn (of their gap about £9 bn is avoidance and £4 bn bad debt)?

Total tax yield exceeds £600 billion on 90% of the economy (about 35%)

How come the remaining 10% (£180 billion +) yields 11%

Would ypu like to explain that?

I’m not called Frances but this is easy enough to explain.

If you tax something you get less of it. No ifs, no buts, simple fact.

Some amount of those grey and black economies simply will not happen if people are taxed on those grey or black economies. Thus we can’t say that tax is being avoided if the thing would never happen if tax were applied.


16 thoughts on “Ritchie still doesn’t understand tax, does he?”

  1. Ah yes, it’s the record industry method of calculating “losses”:

    1. There are 20 million illegal downloads of albums each year.
    2. Each album costs $20 to buy legitimately.
    3. Therefore the record industry is losing $400m per year due to piracy. Something must be done!

  2. It has been pointed out before, but he simply lacks the intellectual capacity to see or understand a consequence like that.

  3. Rob/Tim Newman

    I would like to, a la Clockwork Orange, hardwire a reading of Bastiat into Murphy’s Brain (if he has one) and explain the concept of ‘second order consequences’ – he really is an absolute Epsilon minus semi -moron…….

  4. If you believe there is a joy of tax then it is consistent that taxing something will get you more of it. It’s logical when derived from a bat shit crazy axiom.

  5. Most of the lost VAT is down to the exemption of anyone with VATtable turnover lessthan £69k from VAT.
    That’s most one-man businesses where labour is more important than bought-in materials.

  6. I guess the fool doesn’t realise that much of the grey economy is made up of handymen, window cleaners, chars etc with pretty minimal levels of income, certainly below the VAT threshold. A lot of employees do a bit extra at the weekend for some holiday money. If it were taxed, would they continue to do the work? Some might but most would conclude it was not worth the hassle.

  7. The guy is a fool. Extrapolating from the parts of the economy where big dollops of tax are paid (large corporations, PAYE/NI, large company VAT) to the income of small traders whose marginal tax rates are lower and where tax exemptions apply as a larger proportion of the potential liability is clearly absurd. Add to that that the collection rates from small payers is likely to be much lower than wholly compliant FTSE companies and his question is answered.

  8. Frances Coppola gave a very cogent estimate of the scale of the shadow economy and the Meister just brushed it aside. His arguments are totally abzurd (his pronunciation) and certainly not grounded in reality.

  9. the Laughing Cavalier

    I would still like to know the true figures for the cost of VAT Carousel Fraud from 1997 to 2010 and from then until now.

  10. Would it be sufficiently ‘real’ for RM to point out that a union mouthpiece arguing HMRC chaps should ask criminals to submit tax returns is unlikely to be advantageous to union membership numbers? For all sorts of reasons?

  11. He doesn’t seem to realise the VAT gap is the estimated total of everything, not evasion. So it includes all those bits shown separately for direct taxes.
    If you applied the same ratios from direct tax for evasion to his 10% I suspect the hidden economy figures would shrink a lot.
    But if all this work is going on would it not also suggest the unemployment figures are too high and benefit fraud too low?

  12. We should take this more seriously.

    The difference between tax not collected + corporate subsidies and this year’s deficit is around 2,125 pounds per year for every single person in the UK.

    But the lizards are squirreling it away in their wormholes offshore.

    Forza Corbyn! Hail Baron Murphy! Father Of Our Country!

  13. I am not surprised Frances, after all his claims are totally absurd. If you accept that there is 168bn of unrecorded economic activity in the UK, with illegal stuff in addition (!), then who is doing all this? If you divide it by the number of unemployed – say 1.86m – then this implies each and every one was getting £90k! I would have thought that this would be noticeable in some way at an aggregate level – for example in supermarket takings, VAT receipts etc. Surely all these people don’t stick the £50 notes under the mattress.

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