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Carbon taxes versus carbon trading

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Tax evasion

It is becoming more common to hear about wealthy people, such as football managers and chief executives, evading taxes. Mirco Tonin discusses how economists attempt to measure the extent of tax evasion in an economy

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In 2007, HM Revenue and Customs (HMRC) asked five major UK banks about their clients’ offshore accounts. It emerged that only about 25% of individuals declared some income from these accounts. HMRC then gave the clients of these banks the opportunity to put their tax affairs in order by voluntarily disclosing undeclared liabilities in return for lower fines. This yielded over £400 million in unpaid tax, penalties and interest.

After this result, in 2009, HMRC required more than 300 financial institutions to provide details of offshore-account holders. Customers had the opportunity of making a full disclosure of all undeclared liabilities and of paying all outstanding taxes and duties, interest and a 10% penalty by the deadline of 12 March 2010. Usually the penalty is much higher — up to 100% of the unpaid liability.

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Carbon taxes versus carbon trading

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A student’s view

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