Black economy may generate more than £100bn a year

The
UK black economy could be worth more than £100bn a year, according to new
research.

A
report in the Economic Journal, by academics at the University of Cyprus and
the University of Guelph, Canada, estimates that cash-in-hand work is the
equivalent of 10.6 per cent of gross domestic product.

Blue-collar
workers are the least honest, the report says, declaring 46 per cent of their
income, while white-collar workers are slightly better, reporting 61 per cent
of income.

The
Government is trying to clamp down on tax evasion, following a report on the
black economy by Lord Grabiner.

However,
the new report warns against raising taxes to make up the shortfall.

"A
country trying to curtail the loss of tax revenue by raising tax rates can
create a vicious cycle, as this reinforces the incentive not to declare
economic activities to the public authorities," it says.

By Daniel Thomas

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