Illegal activities- recent and planned developments

Hugh Skipper

What I’ll cover

• Recent and planned developments to:

• Drugs• Prostitution• Alcohol and tobacco smuggling• Tax evasion

• Most of these to meet Eurostat requirements

Drugs, background

• Introduced in 2014 Blue Book• Eurostat requirement

• Comparability across member states

• ONS approach now Eurostat approved• Demand based methodology

• User numbers, rather than seizures• 6 drug types

• Full data for 2003 used as base• Projected by user numbers, prices, purity

• Adds £4.9bn to GDP 2013 (0.3%)

Drugs, further developments

• In Blue Book 2015, corrections to• Dollar conversion • Volume measure methodology

• Academic review – now near final• Broadly clean bill of health• Stressed difficulty of accurate measurement

• Recommendations: • Partial adjustment for purity – reduce volatility• Better measure of usage – work with Crime Survey

• Will follow these up• But need to prioritise

Prostitution, background

• Introduced Blue Book 2014• Eurostat requirement

• Now Eurostat approved

• Supply based methodology• Number of prostitutes

• Data for 2004 escalated• Using male 16+ population• Consumer price index

• Adds £5.9bn to GDP 2013 (0.3%)

Prostitution, further developments

• No methods changes in 2015• For 2016 Blue Book, working weeks assumption

• 52 weeks to 40, in line with Netherlands• Eurostat keen for this

• Academic review – now near final• More critical than drugs review

• 52 weeks assumption, 25 clients per week assumption

• But improvements less straightforward than for drugs• Will follow this up

• Again, need to prioritise

Alcohol and tobacco smuggling

• Methodology introduced 2000-01• Volumes from HMRC• Prices from a range of sources• Assumed proportions for different outlets

• Adds £1.3bn to GDP in 2013 (0.1%)• Small revisions in 2015 Blue Book

• Taking numbers consistently through the accounts

• Wider update of sources and methods planned• Review assumed proportions• Assess tax gaps data for wine smuggling

• In co-operation with HMRC

Tax evasion

• Blue Book 2015, major review of methodology• Corporation and income tax evasion

• Previous model from 1998, used 1994 as a base• Differences production v income measures escalated• Small impact on balanced GDP

• New method developed with HMRC• Now Eurostat approved• Good example of co-operation

• Uses HMRC tax gaps data• To estimate unrecorded income/production

• Bigger impact - upward revisions to GDP all years• £5.4bn 2013 (0.3% GDP)

Tax evasion, future plans

• Refine new methods for corporation/income tax• Build understanding of HMRC data• Streamline production

• VAT fraud: explicit estimation for 2016 Blue Book• To meet Eurostat requirement

• Methodology for 2016 approved internally• Uses new income/corporation tax evasion estimates

• Revisions to GDP likely (subject to balancing)

• Continuing development planned• In co-operation with HMRC• E.g. confronting with HMRC VAT gaps

Any questions?