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Why have tax revenues collapsed so dramatically?

While you would expect tax revenues to fall significantly during a recession, the enormous collapse in UK tax income has shocked even those more experienced observers of the UK economy. So why have tax revenues collapsed so dramatically in the UK and what can be done to turn around this situation?

When you consider that 2 million Britons have either accepted pay cuts or reduced hours over the last 12 months to ensure employment in the short to medium term, it's perhaps no surprise to see tax revenues fall so dramatically. While UK businesses are fighting for their very survival, UK employees are basically being forced into a corner whereby the need to accept concessions themselves in order to retain employment in the foreseeable future.

While in theory it is not unfair to ask both business leaders and employees to "do their bit" during these very difficult times, there is growing concern that some employees may well be "taken advantage of". This is causing friction between business leaders and the unions and this will only worsen as the unemployment number in the UK continues to rise and businesses continue to suffer. In reality, tax income for the UK government will only return to former levels once the economy is buoyant and the unemployment number begins to fall.

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