Cash-in-hand trades row minister told to go away and fix tax system

By BEN GLAZE
Published on 25/07/2012 00:00

A TREASURY minister who said it was “morally wrong” for householders to pay tradesmen in cash for a discount came under fire yesterday from a body representing plumbers, builders and electricians.

Exchequer Secretary David Gauke sparked controversy after accusing homeowners who give workers cash of helping them avoid tax.

He said: “Getting a discount with your plumber by paying cash in hand is something that is a big cost to the [HM] Revenue [& Customs] 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.

“That is a large part of the
hidden economy.”

The government loses about £2 billion 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’s comments come as HMRC plans an amnesty to encourage workmen to pay their fair share of tax.

Yesterday, Tariq Dag Khan, from the tradesmen 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.

“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.”
Labour leader Ed Miliband, on a visit to Paris to meet French president Francois Hollande, waded into the row, saying ministers should be focusing on large-scale tax avoidance.

Asked whether paying cash in hand was “morally wrong”, Mr Miliband 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.”

TaxPayers’ Alliance political director Jonathan Isaby called on ministers to simplify the complex tax system.

He said: “Many people in the squeezed middle feel that benefit fraudsters can get away with ripping off the taxpayer on the one hand, while those fortunate enough to afford crafty accountants and expensive lawyers can dodge their taxes via legal loopholes on the other.

“As long as this is the case, they will find it hypocritical for ministers to lecture them about paying cash in hand. The government should focus on making our taxes simple, affordable and fair, instead of sitting in judgment on people.”