Britain's black market accounts for about 10pc of the economy, or more than £150bn a year, depriving the country of billions of pounds of lost taxes, according to a report by the Institute of Economic Affairs.
The Government has been urged to simplify the tax system and do more to encourage entrepreneurs to break what the IEA warned was a “dangerous cycle” of more onerous taxes leading to an even bigger black economy.
Philip Booth, editorial director of the IEA, said: “Evidence proves that excessive taxation and regulation is a boon for illicit economic activity. A simplified tax system would reduce this by developing a culture of commitment to paying taxes.”
The size of the black market has been shrinking over the past decade in the UK, in common with many other major economies. But the rate of decrease has slowed since the onset of the financial crisis in 2007, according to the IEA.
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