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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 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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