We can construct any number of measure to try and work out whether taxes are too high. Are they damaging incentives for example, distorting the economy too much and so on. One possible measure is to try and see how much is being avoided. Too much and we might think we’ve got the rates too high, if there is sufficient profit in such avoidance to risk jail time for doing so.
Ian Davidson, a Labour MP, said it was staggering that
British firms and traders were dodging an estimated £11.9billion of VAT
annually. "The business community must be full of thieves and villains
if one in eight pounds of VAT is being lost," he said.
Data
in the Chancellor’s pre-Budget report indicates the tax-take from VAT
and excise duty will fall sharply as a share of GDP before the end of
the decade.
VAT revenue will drop from 6.2pc to
5.9pc by 2008, while excise duty falls from 3.3pc to 2.9pc by 2010 –
together cutting revenue by £7billion a year, enough to seriously
damage the public accounts.
The Treasury said
yesterday that it had factored in "deterioration" as a prudent
forecast, but denied the Government had thrown in the towel on tax
collection.
Customs officials say a big chunk of revenue is being creamed off by organised crime in "missing trader" rings.
If even the Treasury thinks that current tax rates are causing increasing fraud might that not be a sign that the taxes are indeed too high?
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