14th journées Louis-André Gérard-Varet

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Self-Employment Underreporting in Great Britain: Who and How Much?
Ana Cinta G. Cabral, Gareth Myles, Christos Kotsogiannis

Last modified: 2015-05-19

Abstract


The present paper estimates the degree of income underreporting bythe self-employed in Great Britain using the Pissarides and Weber (1989)approach. It then extends the model to incorporate the analysis of thedeterminants of noncompliance based on characteristics found on the taxreturns and also on other socioeconomic factors. The research nds in-come reported by the self-employed must be multiplied by a factor of 1.28to obtain their true income, which translates into a lower bound estimateof the black economy of 1.7% of GDP. We nd that self-employment un-derreporting varies by sex, age, type of occupation, region, education andcharacteristics based on the self-employment activity. These ndings canprovide guidelines to the tax administration about the prole of individ-uals that need to be addressed with their compliance activitites.

Keywords


self-employed, evasion, underreporting