Paying tradesmen cash in hand morally wrong, says minister

 

Mr Gauke said cash payments were "facilitating" the hidden economy

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Treasury minister David Gauke has said it is "morally wrong" to pay tradesmen such as plumbers, builders and cleaners in cash in the hope of avoiding tax.

He argued the practice came at "a big cost" to the Treasury and meant other people had to pay more.

But Treasury sources stressed Mr Gauke was answering a specific question rather than proposing a policy change.

Labour said the government should be focusing on "clamping down" on "large-scale tax avoidance".

Asked if he ever had paid cash to tradesmen to reduce his costs, London Mayor Boris Johnson said: "I've certainly paid a lot of cash in hand."

In response to the same question, Local Government secretary Eric Pickles said: "Certainly not."

And Culture Secretary Jeremy Hunt said: "David Gauke was saying that tax-dodging is wrong and personally I haven't dodged tax."

The government is estimated to lose about £2bn each year to the black economy as tradesmen fail to pay VAT or income tax by not declaring payments and keeping them "off the books".

Mr Gauke told BBC Two's Newsnight there was nothing wrong with paying in cash, but doing so actively to avoid tax was wrong.

'No alternative'

Mr Gauke said: "When a tradesman says, 'Here's a 10%, a 20% discount on your bill if you pay me cash in hand' that is facilitating the hidden economy. That's as big a problem in terms of loss to the Exchequer as tax avoidance. Revenue is not being paid as it should be paid."

Analysis

I pay a builder for a new patio. Crazy paving and all. Knowing he has to pay VAT on my bill I make a suggestion: How about I pay him in £20 notes?

That would enable him to slip the cash into his pocket and out of sight of the tax man. It would also make my bill smaller.

It's illegal for my builder not to declare all his earnings. But what's my responsibility for his action?

According to Treasury minister David Gauke it's "morally wrong" to want to offer cash for that purpose.

Hear that? The sound of cabinet ministers shuffling uncomfortably as they remember years of paying cash to their builders, plumbers, gardeners, nannies and cleaners.

In its assault on the tax-avoidance practices of the rich, the government has been ready to use the rhetoric of morality. It's about fairness.

But at a time when people feel stretched, telling people they have a moral responsibility to pay top whack is a slightly sticky place for a minister to be.

He added that he had "never said to a tradesman, 'If I pay you cash, can I get a discount?'"

But asked if he thought any ministerial colleagues had done so, Mr Gauke replied: "I don't know, but if people do do that they have to do so with the recognition that means taxes will be higher for the rest."

The Daily Telegraph quotes Mr Gauke as saying: "Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax.

"I think it is morally wrong. It is illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash."

But Tariq Dag Khan, of the tradesman recommendation website Rated People, said: "David Gauke's comments that it is morally wrong to pay tradesmen in cash do little to help tradesmen who are struggling in a difficult economic climate.

"For the reality is that there is little or no alternative to cash payments for many tradesmen, and criticising the whole industry belies a misunderstanding of the situation many customers and tradesmen are in.

"There is a great deal of trust involved when hiring a tradesman for both the tradesman and the customer and therefore cheque payments do not provide a viable alternative especially when, if the cheque bounces, the tradesmen could be dangerously out of pocket and in some circumstances forced out of business as a result."

Boris Johnson among politicians asked if they ever paid cash in hand

Labour leader Ed Miliband, on a visit to Paris to meet French president Francois Hollande, said: "What I say is that the job of government is to pass the right laws to clamp down on tax avoidance - that's the most important thing of all.

"What I will be saying to the government is that they should be clamping down on the large-scale tax avoidance which has been revealed in the past few days and I think that's what people want to see from the government."

Last month Prime Minister David Cameron condemned the use in the past by comedian Jimmy Carr of a Jersey-based scheme as "morally wrong" and in his Budget speech Chancellor George Osborne described tax avoidance as "morally repugnant".

Mr Gauke was interviewed after he outlined proposals to tackle "aggressive" tax avoidance schemes, promising the government would force "cowboy" financial firms to disclose the names of people using them.

 

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  • rate this
    -6

    Comment number 1071.

    Perhaps all the Tory-bashers here should try counting all the money those great socialists like the Kinnocks and the Blairs have squirrelled away while the rest of us are hard up. There's real hypocrisy.

  • rate this
    +8

    Comment number 1070.

    What's morally wrong is spending my tax pounds on things that I will get no benefit from, disapprove of or were never mentioned during the election. In fact I think it would be morally correct for taxpayers to be able to pay their tax directly to those organisations they support such as the NHS etc and cut out the middleman - the Treasury.

  • rate this
    +7

    Comment number 1069.

    A large number no longer consent to tax levels required to fund our disfunctional system. Our labrythine tax allowances create opportunities for avoidance. There is no participation or reciprocity between those taxed & those benefiting and our adminstration has been guilty of expenses fraud & service company employment practices. For anyone to discuss the morality of this situation is perverse.

  • rate this
    +3

    Comment number 1068.

    We should change the way we generate tax. Reduce (and eventually eliminate) income tax, and introduce (then gradually increase) property tax - a percentage of the value of your property. Problem with this, of course, is that power rests with the wealthiest landowners, who will be absolutely against a property tax. The wealthiest people should pay the most tax, not the least.

  • rate this
    +9

    Comment number 1067.

    David Gauke? Isn't his wife a corporate tax avoidance lawyer?

  • rate this
    +9

    Comment number 1066.

    This sick government know no bounds in it's "moral" crusade to smash the ordinary working person trying to put food on the table and pay for their basic bills, but does nothing about the rich tax evaders or utilities charging obscene amounts of money, sort them out before Joe Bloggs,

  • rate this
    +9

    Comment number 1065.

    Thre is NOTHING morally wrong with paying cash in hand, what is morally wrong is the person you are paying failing to declare the income on their tax returns.

  • rate this
    0

    Comment number 1064.

    So many people think its ok for them to benefit from tax evasion but not for people who are richer than them.
    Hypocrites, the lot.

  • rate this
    +2

    Comment number 1063.

    @1004/Paul If the cost of living for the £100pa person is £50pa, and the £30Kpa persons is £15Kpa, then they both have *identical* earning power in relation to their local economies.

    "There's lies, damned lies and Statistics". =D

  • rate this
    -1

    Comment number 1062.

    Amazing how few people are addressing the actual question here. Is it morally wrong for tradesmen to avoid tax by requiring cash-in hand? Yes. Is it any worse for a rich man to murder his brother than a poor man, just because of their wealth? Surely stealing is wrong absolutely. The biblical commandment (not sure which one) doesn't say "Thou shalt not steal (but it's OK if you are hard up)".

  • rate this
    0

    Comment number 1061.

    If I paint my nextdoor neighbour's house and she pays me by keeping me in food for a few months have I avoided or evaded paying tax?

  • rate this
    +12

    Comment number 1060.

    Yet another distraction from the awful mess this government has created and the apalling behaviour of their billionaire friends. It's also another attempt to split the real creators of wealth in this country.

  • rate this
    +13

    Comment number 1059.

    If we're going to question the morality of avoiding paying tax to plumbers and electricians, maybe we should also be asking why are we paying "value added tax" on water, electricity and maintenance of those system when we consider them basic, not luxury?

  • rate this
    +2

    Comment number 1058.

    Like how MP's like to preach yet they need to look at themselves first...is not claiming expenses just as bad, well it is even worse. If the VAT was not as high or that they knew it was being spent properly and not wasted then most would stop paying cash.

  • rate this
    +7

    Comment number 1057.

    Something not quite right here. Paying tradesman cash so he does not pay tax is evasion which is illegal. Using a legal scheme is avoidance.
    Both have moral questions but the first is illegal if the tradesman does not declare it.
    I am concerned that politicians are starting to play the moral card - if so, let's reopen the expenses issue and ask why they are still MPs.

  • rate this
    -3

    Comment number 1056.

    The entire point of taxing income and the value of products is to cream off the productivity and property of individuals in order to fund public works and to provide benefits for those not in work. Whilst this might be deemed laudable, it is not a right but an imposition and the only reason it is entrenched in law is to add force to an otherwise morally indefensible position.

  • rate this
    +7

    Comment number 1055.

    Dear Mr Gawk, do you remember when one was younger and one's mother told one that there are times in one's life that one should stop talking, engage brain and walk away. Well this is one, any small trader who earns under £60k doesn't have to collect or pay VAT. And unlike your tax avoiding socio economic equals they drive around in vans and small cars.

  • rate this
    +4

    Comment number 1054.

    Ah its the working man to blame now! Southern Tories what a pathetic sad disgusting lot you are. Please leave our shores because you are a waste of space and a wrecker.

  • rate this
    +9

    Comment number 1053.

    An MP lecturing us on the fairness of avoiding tax, really??? This is the same people who let Vodafone off paying tens of millions of pounds in tax, the same people who had their snouts in the expenses trough and fought very hard to prevent this info coming to the public domain. Do you honestly think the majority of financially hard pressed people in this country will take a blind bit of notice?

  • rate this
    +1

    Comment number 1052.

    The biggest protogonosts of morality have always themselves to something to hide! Let us stop talking about what is moral or what is immoral. Make tax avoidance schemes unlawful and let every one be ruled and governed by the same rules and regulations including senior bosses of BBC!

 

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