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BBC reported the UK's Office for National Statistics considered for the first time the contribution of the hidden-economy to the GDP:
For the first time official statisticians are measuring the value to the UK economy of sex work and drug dealing and they have discovered these unsavoury hidden-economy trades make roughly the same contribution as farming and only slightly less than book and newspaper publishers added together.
Illegal drugs and prostitution boosted the economy by £9.7bn equal to 0.7% of gross domestic product in 2009, according to the ONS's first official estimate.
A breakdown of the data shows sex work generated £5.3bn for the economy that year, with another £4.4bn lift from a combination of cannabis, heroin, powder cocaine, crack cocaine, ecstasy and amphetamines.
Joe Grice, chief economic adviser at the ONS, said: "As economies develop and evolve, so do the statistics we use to measure them. These improvements are going on across the world and we are working with our partners in Europe and the wider world on the same agenda.
"Here in the UK these reforms will help ONS to continue delivering the best possible economic statistics to inform key decisions in government and business."
Alan Clarke, a UK economist at Scotiabank, said that although the government would not feel the benefit of illegal work in terms of income tax take, there would be a spending boost.
"A drug dealer or prostitute won't necessarily pay tax on that £10bn, but the government will get tax receipts when they spend their income on a pimped up car or bling phone."
Keeping with the theme, I can "estimatedly project" two things from the above:
- if GDP is to include hidden-economy and beyond-damnd-liers have free reign to estimate it as they see fit, don't be surprised when the estimated rate of inflation and consequently your mortgage rate will vary in no relation with the as-reflected-by-your-payslip-economy
- if hidden-economy is officially recognized but still not taxed, where's the incentive for others to run their business in the open?
SN mates, what do you make of it?
(Score: 2) by frojack on Saturday June 07 2014, @06:58PM
While VATs are also consumption taxes, and better than income taxes, the FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. It is much more complex and is typically hidden from the retail consumer. Second, in industrialized countries that have a VAT, it coexists with high-rate income tax, payroll, and many other taxes that, in some instances, have led to marginal tax rates as high as 70 percent. Third, all other industrialized countries, except Australia and Japan, have a much larger tax burden than the U.S., which requires higher rates and makes tax administration much more difficult. Lastly, a VAT is a lobbyist’s dream, allowing them to install their loopholes unbeknownst to the purchaser.
No, you are mistaken. I've always had this sig.
(Score: 2) by Reziac on Sunday June 08 2014, @02:50AM
Some years ago when this topic came up, someone mentioned the VAT rates in Denmark, and how much it comes to. The upshot was that a car which sells for $15,000 in the U.S. sells for $42,000 in Denmark, the difference being the many layers of VAT.
And there is no Alkibiades to come back and save us from ourselves.
(Score: 2) by hankwang on Sunday June 08 2014, @10:55AM
You have been misinformed. VAT in Danmark is 25% of the consumer price, and this percentage is not stacked up (i.e., the layers will always add up to 25% of the consumer price). The one who told you this was probably confusing VAT ("Moms" in Danmark) with the vehicle registration tax, which is 105% to 180% [www.skat.dk]. Other European countries have different VRT systems, although the Danish VRT seems to be the highest. For example, Netherlands used to charge 45%, but moved to a VRT based on CO2 emissions per kilometer, e.g., zero VRT below 3.8 L/100 km gasoline usage, and 16 kEUR for a car that does 8 L/100 km (that's 5 mpg-US).
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(Score: 2) by Reziac on Sunday June 08 2014, @02:43PM
Does the VAT only apply to products made in-country? If so, to what degree has this causes manufacturing to move elsewhere?
And there is no Alkibiades to come back and save us from ourselves.
(Score: 2) by hankwang on Saturday June 14 2014, @07:45PM
(Late response, hadn't noticed this question) Business-to-business sales that cross borders are not subjected to VAT, although the seller (recipient of the money) has to keep track of the sales and the VAT registration number of the buyer and file this data with their local tax authorities. I assume that this is in order to discourage fraud.
With business-to-consumer sales within the EU, the consumer pays VAT according to the rates in the country of the seller.
With out-of-EU sales into the EU above some threshold, the consumer should pay VAT inside their own country. In Netherlands, usually the shipping company (UPS/DHL/etc.) handles the financial details upon delivery.
I don't see how corporations could save on VAT expenses by moving manufacturing to elsewhere. As I said before, VAT is not an expense for corporations, just a book-keeping effort. VAT is paid by consumers on goods purchased in the EU. In theory, companies could offer slightly lower VAT-inclusive prices to consumers by shipping and selling from a low-VAT country like Luxembourg, which has 15% VAT compared to 19--25% for most of the EU. But I've never seen a web shop that does this; probably the international shipping costs make it not worth the trouble.
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(Score: 2) by hankwang on Sunday June 08 2014, @10:30AM
It is not complex at all. A business entitity charges VAT to its customers (business or consumer) and pays VAT to their suppliers. The difference goes to the state tax collection agency; if the difference is negative, the business receives the difference. Only the consumer at the end of the chain, who does not sell any goods or services, is a net payer of VAT; for all the entities inside the chain, VAT payments and receipts cancel out. For interstate business-to-business transactions, no VAT is charged at all.
Disclosure: I file VAT statements every quarter.
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