Action needed to tackle tax lost in the shadow economy

Commenting on the ACCA’s report which found that Britain's shadow economy of undeclared trade in goods and services is worth around £222.5bn, George Bull, senior tax partner at RSM said: 

‘The ACCA is right to draw attention to the staggeringly large size of the shadow economy and the resulting tax that is lost to the Exchequer. This is an issue of major national importance that was largely ignored by all parties in the run-up to the election.

‘We learned yesterday from the UK Attitudes Survey that an increasing number of Britons back the idea of paying higher taxes for improved public services. But would they be so happy knowing how much tax is lost through the activities of those operating in the shadow economy? It’s only right that every effort is made to collect tax evaded by those in the shadow economy before imposing higher tax bills on honest taxpayers.

‘The latest HMRC survey suggests that £6.2bn in tax is lost per year in the hidden economy, equivalent to 17 per cent of the total tax gap. This is just a fraction of the ACCA’s £222.5bn estimate of the size of Britain's shadow economy, so perhaps HMRC is underestimating the size of the undeclared trade in goods and services across the UK. Urgent action is now needed to bring those operating in the shadow economy into the tax system.’