Simon Sweetman was an inspector of taxes for 18 years. He left the Inland Revenue in 1989 to join Chartered Accountants Scrutton Goodchild & Sanderson, later part of Scrutton Bland, where he was successively a senior manager and later a partner. He has been an independent consultant since 2001. He is a former member of the tax policy unit of the Federation of Small Businesses and the small business working group of the Chartered Institute of Taxation.
It would seem from the last few days that the government thinks it can no longer rely on the Olympics to distract attention from its economic failure, but it has to start making an enormous fuss about tax avoidance, says Simon Sweetman.
In fact since I wrote that sentence the Olympics seem to be doing a pretty good job of distraction, not so much bread and circuses as burgers and circuses, but hiding the economic catastrophe developing around us.
However, given evidence of the enormous sums squirreled away in tax havens by the über-rich and the complicity of British banks in everything from fixing of interest rates to massive money laundering, it takes a deep breath and points the trembling-with-indignation finger at those who pay tradesmen in cash, so assisting them in not declaring their income. Well, I suppose I shouldn’t grumble, having been pointing out for years that paying in cash for a “discount” is complicity in tax evasion, but it’s hardly big time.
Mr Gauke then went on to say that the tax gap is £35bn – a figure which the government has never accepted in the past – and that only £5bn of this is down to avoidance. The rest is down to “tax evasion, the hidden economy, criminal attacks, and so on…” So now we can see what this move is – an attempt to shift the focus away from the banks and the wealthy and blame the workers instead.
It is possibly inept in that new government ministers can now expect to be asked if they have ever paid a tradesman in cash (well, of course not, I don’t pay the tradesmen myself, what are servants for?).
But of course everyone has. I pay a car mechanic in cash because he has a record of bankruptcy and can’t get a bank account: I pay the window cleaner in cash because neither of us can be bothered fiddling around with small cheques which it will cost him to process. Many people pay tradesmen in cash because they don’t have cheque books any more and small tradesmen are not set up to take card payments. This is nothing to do with tax evasion.
Everything points to a conclusion in which the government holds its hands up in horror at the evidence of massive tax avoidance, money laundering, etc., and then decides that what it might actually do something about is small scale evasion – like the plumber sent to prison for 12 months for evading £50,000 of tax. Of course he shouldn’t have done it, but the cost to the state of investigating and prosecuting him and then keeping him in prison will be many times the evaded tax.
This government (and it’s not the first to do it) is big on talking about what it’s going to do and then not actually doing anything about it. And while it continues to strip HMRC of resources it won’t get round to doing very much.