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A Black Economy?

All indications are that even though high street spending has recently increased,new car registrations are breaking records and whilst we can shout “statistics and dam statistics”, with higher consumer spending and un-employment both low and in decline one would expect Government tax income to be growing, but it isn’t! So what’s happening?

Consumer spending is up and there are more people in work, but ironically the Governments tax receipts are 3.5% lower than they were for the same time last year.

One explanation I read is that even more than normal (as we are indeed a country of entrepreneurs) more and more people are becoming self-employed. Indeed self-employment accounts for more than 80% of new jobs registered since 2008. There is a view that many self-employed may be people who were previously in well-paid jobs, who have gone self-employed since being made redundant and their earnings are now fairly low, thus (I conclude) their tax contribution is low.

Adding to this increase in employment are those older folks who are forced to take part-time work filling shelves at Tesco’s (and the like).

Having noted those factors though, it doesn’t add up to the increase in consumer spending as many of these jobs are taken to make ends meet. True, the increased personal tax allowance could be a factor as some have been able to come off benefits and get a job without paying income tax. These people are of course better off than they were, but not enough to make a difference to the taxman.

The Guardian says its just conjecture, but perhaps many people in Britain are trying to keep one step ahead of the Inland Revenue by working “cash in hand”, which would explain the increase in consumer spending at a time when tax revenues to the exchequer are lower than expected.

I found the whole subject interesting and you can read more on but it’s a fascinating dilemma

avatar Name: Alexandra Eager
About: Alex has worked as a Financial Controller and Finance Director for many years for a variety of companies across a range of industries but more recently she has moved away from accounting working for an internet marketing agency as Finance and Operations director, primarily overseeing the finance functions and search engine optimisation (SEO) for clients. Follow Alex on G+ and on Twitter @Alex_BusDirUK
Alex runs her own company with two fellow owners developing a suite of e-commerce web sites and promoting them directly. “I found that SEO and finance were quite compatible both needing an eye for detail, research and analysis as well keeping up with new developments and changes.”

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