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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?