Unregistered businesses, colluding employers, the self-employed and employeeswho work in the informal economy are the primary targets of theTreasury-commissioned report compiled by Lord Grabiner QC on the informaleconomy.
He ruled out a general amnesty, used in some countries to encourage businesses to register with the taxman, instead recommending stiffer penalties and wider investigative powers for tax and other authorities.
He also suggested more frequent and less predictable ‘signing on’ times for benefit claimants making it harder for them to work at the same time as claiming illegally.
The hidden economy includes anything from casual moonlighting, small- andlarge-scale tax evasion to organised crime, for example drug trafficking andmoney laundering.
Income tax, national insurance and VAT areall lost through businesses operating outside the official economy.
One recommendation to prevent the growth of unregistered businesses is to require newbusinesses to register immediately with the Inland Revenue, instead of after theexisting 18-month deadline.
To stop benefits fraudsters, the government intends to set up a US-inspired ‘twostrikes and you’re out’ policy, whereby claimants will not be allowed to claimany benefits for a proposed period of six months.
It is estimated that some120,000 people are claiming benefits while working, costing the taxpayer £500m ayear.
However, the reports stated that benefits mainly affected are a relativelysmall proportion of the total social security budget.
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