Leading article: When cash-in-hand is not acceptable

 

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Government strategists might have preferred it if Treasury minister David Gauke had given a more deft answer when an interviewer asked him about the practice of paying tradespeople such as builders, plumbers and cleaners in cash.

The deal is that the customer gets a smaller bill and the supplier of the service avoids the necessity of doing paperwork which would ensure they paid tax in full. Instead Mr Gauke insisted the custom was "morally wrong".

There may not be an exact moral equivalence between cash-in-hand payments to a plumber to fix a burst pipe and the kind of off-shore tax avoidance schemes devised for the rich and infamous, which the Chancellor, George Osborne, has described as "morally repugnant". The Treasury estimates that 14 per cent of all unpaid tax income is the result of aggressive avoidance schemes, which are not illegal but which unfairly deprive the public purse of income. It is right that ministers are curbing such schemes by making tax advisers disclose details of wealthy clients who take advantage of these devices.

Even so, the national exchequer loses about £2bn each year through tradesmen and women failing to declare income tax or record earnings on which they should pay VAT. Action does need to be taken, but common sense is also required. It is entirely reasonable for ordinary citizens to use cash to pay tradespeople. The assumption is that such people are self-employed and make proper declarations of their earnings, where necessary, to the tax authorities. It is up to the Government to simplify such declaration and payment systems if it wants to remove disincentives to fuller disclosure.

But it's different where, for example, a nanny is employed on a regular basis, or a builder has done major work. Tax evaded in this way is revenue lost that must be made up by those who do pay tax. The authorities should impose on tradespeople the duty to provide itemised bills and receipts, and require householders to retain them for possible inspection. Evasion of tax here is not of the same moral order as massive tax dodging by the greedy rich. But nor is it fair and it should not be accepted.

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