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Hidden Economy Under Scrutiny

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New ways to deter people from entering the hidden economy and to encourage them to move into the formal economy will be examined by a newly formed group of experts - the Hidden Economy Advisory Group.

The Advisory Group is chaired by HM Revenue & Customs and was announced as part of the 2009 Pre-Budget Report.  The Group will:

  • examine the main barriers preventing people in the hidden economy joining the formal economy;
  • recommend workable measures that might be introduced to remove or reduce those barriers;
  • examine the motivations and behaviours that lead people to join the hidden economy; &
  • make recommendations on what can be done to prevent and stop people joining the hidden economy.

The Group will present initial findings on the hidden economy in time for Budget 2010.

Mike Eland, chair of the group and Director General of Enforcement and Compliance at HM Revenue & Customs said:

"We estimate that the hidden economy contributes to around 7.5% of the net tax gap, which means we could be losing in the region of £3bn a year from people who are living and working in the hidden economy.  They also gain an unfair competitive advantage over businesses that pay their taxes.  This new group of experts with a variety of experience will identify new practical steps to tackle this problem.

"By understanding the behaviours, attitudes and circumstances of those working in the hidden economy, we will be able to identify the right mix of incentives and deterrence to encourage them to move into the formal economy and stay there - even when times are tough."

Members of the Hidden Economy Advisory Group include:

  • Professor John Hasseldine, Tax Research Institute, Nottingham University Business School;
  • Paul Webley, Professor of Economic Psychology, School of Oriental and African Studies;
  • Andrew Cave, Head of Policy, Federation of Small Business; &
  • Aaron Barbour, Head of linksUK (interim), Community Links.

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