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House of Lords written question – answered on 10th July 2013.

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Photo of Lord Jones of Cheltenham Lord Jones of Cheltenham Liberal Democrat

To ask Her Majesty’s Government what assessment they have made of research by Friedrich Sneider and Colin Williams of the Institute of Economic Affairs on the value of the United Kingdom’s shadow economy; and what measures they are taking to address that issue and improve public finances.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

The Office for National Statistics (ONS) works with HM Revenue & Customs (HMRC) to estimate the amount of hidden activity in the UK economy.

The ONS adjust their estimate of the size of the economy to account for unrecorded transactions involving small businesses and sole traders, based on HMRC’s assessment of lost revenue.

HMRC also publish an annual estimation of the tax gap, which, in 2010-11, was estimated to be £32 billion, equivalent to 6.7 per cent of tax liabilities.

The Government is investing in HMRC to tackle tax avoidance and evasion and to reduce losses from fraud, error and debt — this includes almost £1 billion over this Spending Review period, to bring in an additional £9 billion a year in tax revenue by 2014-15. The June 2013 Spending Round announced that HMRC’s compliance yield target will be increased from £23.5 billion in 2014-15 to £24.5 billion in 2015-16.

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