Morally unacceptable

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.

Comments
Old Greying Accountant's picture

Simon ...

Old Greying Acc... | | Permalink

... excellent piece, which echoes many of my own views, thank you for sharing. I just wonder where it is all heading!

ShirleyM's picture

I agree with pretty much all you say    3 thanks

ShirleyM | | Permalink

... but I have this premonition that the bankers, the aggressive tax avoidance scheme users, and the greedy and corrupt corporations will just get a slap on the hand ... but the 'plumbers' will go to jail!

I hope I am wrong.

I have been paid in cash    3 thanks

HudsonCo | | Permalink

I have one client who pays me in cash as he has a problem getting a bank account following a previous bankruptcy. (Naturally I give him a receipt and put it through my own records)

There are many genuine reasons for paying cash other than tax evasion!

Sabre Rattling and Posturing    1 thanks

eyeskyward | | Permalink

Totally Agree...And a typically inept stance by a Treasury Minister and Officials.

The number of cash transactions across small business has risen since 2007 not because of tax avoidance. It is a simple matter of cash flow and credit. A small business can't currently afford to transact though the bank, it costs too much in charges. So it is better to pay in cash.

An inept statement? Well, it certainly demonstrates the disconnect between Treasury Ministers and reality. They do not run a small business in the current environment. This is evidenced in the ineffective policy.

Small business loans are NOT the solution for business (despite the Government's focus on them). Small business need cash flow and unsecured credit via low interest (ideally 0%) and no charge incurred overdraft arrangements...Which is not what the Government is supporting. It is supporting a small business loan scheme with interest. This alongside high VAT charges, energy / fuel charges and other taxes that hit small business hard.

I find it incredible that anyone buys the line that in times of difficulties caused by credit, that small business needs to borrow more. NO !!!

Small business need less charges made on small business accounts and more access to cash at no cost (overdraft). 

Why would any business want to be in debt to a ropy organisation that is already in £Billions of in debt AND being fined for Libor fixing, loan miss-selling, Credit Insurance miss-selling, etc? 

Insanity !

But then if you hire ex-bankers into Treasury, expect Bank friendly solutions. 

Look at the figures of approved overdraft facilities (and not small business loans). Then take a view on cash payments to suppliers. It is not avoidance it is small business survival.

Morally unacceptable    1 thanks

rogtuf | | Permalink

It would be best if the Government put its own (moral) house in order before lecturing the public on morals.  I'm thinking of the issue of paying a material portion of its (employed) staff via service companies to avoid tax.

Morally unacceptable (Barclays Edition)    1 thanks

eyeskyward | | Permalink

 

Here here rogtuf. How about this for indignation: BlackRock Asset Management Pensions Ltd bought (BGI) Barclays Global Investors Ltd in 2009. Through the purchase of BGI, they manage the largest single proportion (22.9%) of the Parliamentary Contributory Pension Fund (PCPF). BGI pioneered trade in Exchange-traded fund(s) (ETF) under the "iShares" brand. Many ETFs are set to track the 3-Month LIBOR Index... I noticed such info was not raised at the Commons Treasury Committee investigation. Perhaps we don't need to know how Libor fixing screwed Small Business but potentially benefited MP's?

Indeed and .....

ThornyIssues | | Permalink

I wonder just how much of the cash handed over to pay for exhorbitantly priced food, drink and "tat" at the Olymic Park will go honestly through the books?

I will be surprised if HMRC are running a "secret customer" campaign as HMG would not want a Olympic cash-in-hand tax evasion story all over the press. 

Fools rush in    1 thanks

trecar | | Permalink

David Gauke spent most of his working life in a firm of solicitors specialising in tax and structuring prior to full time politics.

So how does someone who has never worked with small businesses and the self-employed but apparently spent his time with the well-heeled come to be so knowledgeable about a part of the economy he has never experienced. I suspect like most politicians he became an expert and authorised to judge morality when he persuaded 39.32% of the constituency to vote for him. (Notice how many politicians deign to rule to us and pass laws without a true majority of the electorate!)

The trouble is that persuading people to elect you does not suddenly grant you great wisdom. And the need to continually campaign makes wise utterances unlikely. So the higher up the ladder one progresses the more reticence should be in evidence. That suggests that singling out a sector for retribution should not have been the task of a Treasury Minister, even if it was off the cuff. Once Gauke works that one out he might actually come up with the odd useful comment.

Gauke is an idiot but ....

vstrad | | Permalink

... I find your sanctimonious tone equally depressing, Simon.

Great Article    2 thanks

chatman | | Permalink

vstrad wrote:
... I find your sanctimonious tone equally depressing, Simon.

I thought the tone was great, and not sanctimonious at all.

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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.