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Is My Decorator as Morally Repugnant as a Dodgy Accountant?

24th Jul 2012
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Just when you thought it was safe to get back in the water as tax avoidance had taken a break for the holiday season, the admirable David Gauke has brought this summer's favourite topic back to the front pages. 

This is a pity, as I had written a really super article on the morality and ethics of tipping, but now readers will have to wait until next week to discover its conclusions.

The only difference in the latest tax exposé is that the publication railing against modish scams is the Daily Telegraph rather than The Times. In fact, there is another significant change in emphasis since the main thrust of the big news story is little people on the make rather than the ultra-rich.

Otherwise, the connection between morality and taxation is given yet another outing in an apparent attempt to make the whole nation feel guilty rather than merely a few high-profile comedians, business people and sporty types.

There are in fact two main thrusts today. First, that it is invidious to offer plumbers and builders cash as they will inevitably then evade VAT.

That is naive. A decorator is coming to visit me this weekend and I will almost certainly pay him in cash. However, since he charges competitively and only does the odd job now and again on weekends, it seems highly unlikely that his turnover is anywhere near the threshold for VAT purposes. To be on the safe side, I might even ask him whether his turnover exceeds the limit before heading to the cash machine.

It is highly likely that there are other cases where traders are paid in cash and fail to account for the appropriate amount of VAT. This is something that is illegal and should be stopped. However, asking the man and the woman in the street to police a complex tax system that even experts do not understand seems a little unfair and making them feel guilty about choosing not to do so begs its own moral questions.

The second and far more exciting suggestion put forward by Mr Gauke is a dual attack on those who are far more complicit in tax avoidance schemes than the average builder or plumber. Naming and shaming was suggested as a solution to abusive tax avoidance and tax evasion long ago. It is of very limited benefit and had practically disappeared from the agenda. However, it does make for a good sound bite.

The far more exciting idea is to require those legendary private member's associations, accountancy bodies (and presumably their siblings from the worlds of the law and taxation) to kick out those involved in developing and promoting outrageous tax schemes.

Mr Gauke was very keen to draw a distinction between those who honestly assist clients to minimise their tax liabilities by patently legal means and niche boutiques that set up schemes, which he believes are beyond the pale.

Very few of us in the profession, especially those who do not indulge in anything even vaguely close to abusive avoidance, let alone evasion, might well praise a chance for the industry to demonstrate the kind of cleanliness that is generally only associated with those suffering from obsessive-compulsive disorder.

However, the distinction between large providers and niche boutiques could on occasion be somewhat hard to draw since a big four firm has been in the headlines this month as a result of a tax scheme that unsuccessfully attempted to save millions of pounds for clients who probably do not include traders that are likely to work in my home at any time in the near future.

What can we conclude from this latest explosion of interest in the murky world of tax reduction? While all of us would like to pay less tax by guaranteeing a level playing field, some of us might suggest that the organisation under the management of Mr Gauke, HM Revenue and Customs should be doing a far better job of collecting tax than it is. By denuding the Department of the vast majority of its most experienced staff, this government and its predecessor have allowed those involved in tax avoidance (whether abusive or otherwise) and evasion to make hay while the sun shines.

Now that the sun really is shining, it is time for the Government to grasp the bull by the horns and announce a major programme to beef up HMRC (please forgive the highly appropriate but rather mixed metaphors). In doing so, it will bring in far more lost revenues in a year than asking us to pay plumbers and their ilk by cheque rather than cash.

This topic has been aired at length in this column on several recent occasions.

Is Tax Avoidance Morally Repugnant or Good Business Practice?

The Times v. The Tax Avoiders – Round II

When Does Tax Avoidance Become Tax Evasion?

10 Controversial Conclusions

The Law Is the Only Solution

Taxgate - Round VI – A Call for Morality to Head off the Tax Riots

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Replies (8)

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By ShirleyM
24th Jul 2012 09:02

I am strongly against abusive tax avoidance

... and tax evasion.

I don't care whether it is undeclared sales, aggressive tax avoidance schemes, or the 'cut & run' limited companies who have no intention of being legitimate. I think they are selfish, and that includes any accountants/advisors that knowingly assist & guide them.

It puts all the compliant businesses at a disadvantage, and means that the country is deprived of much needed funds. Most the tax spent by the country does go back into our economy, in one way or another, hopefully in a way that benefits everyone ... even those who dodge their tax!

Can the government really fix this? I think not, as the real power lies with the large corporations and some wealthy individuals, and goverment will not want to alienate them. I think they will skirt around the whole problem and just do enough to satisfy Joe Public.

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By User deleted
24th Jul 2012 09:56

So ...

... do the Tories have a death wish.

How's that saying go, don't bite the hand ...

The biggest problem from my viewpoint is that tax revenue is squandered, and the large corporates avoid tax through greed. Most of the little people avoid tax through necessity.

Reality check

Scenario, the morally repugnant bankers have destroyed the financial system, you can't move house because you can't get a mortgage, house prices in your area are falling anyway - you need an extension, your take home is going down because tax is rising and your salary has been frozen for 4 years because of the ineptitude  (and greed) of the politicians. You need more room as you teenage son and daughter can't share a room any longer - so all you can do is build an extension. If you can reduce the cost of course you will, and if that means paying cash and the treasury losing tax you don't really care, you may well have been forced to moonligt to to make ends meet: you have a family to feed and house!

 

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By Wiganer Elaine
24th Jul 2012 10:40

Assumption of guilt

David Gauke appears to be implying that that a trader who accepts cash in settlement of goods/services rendered is essentially dishonest and avoiding/evading tax of some sort.

Never mind that for a small business cash can be better because you don't have to pay bank charges to put your money into the bank and then  pay bank charges again to take your own money out of the bank when you need it!

Does Mr Gauke hope to stir up joe public (generally those who are in employment and pay their tax via PAYE) into a mass of moral outrage against the "tax avoiding self employed"?

OR:

Is this actually a sleight of hand attack on "cash" as a valid means of currency? Will this be the beginning of the end of "cash"? Will all transactions eventually have to be settled by "electronic" means so everything is ultimately traceable and thus taxable?

Either way, Big Brother really will be watching you!

 

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By mikefleming3028
24th Jul 2012 11:48

Morality and Tax

I find it more than a little disconcerting that Mr DMG seems to be leading the debate as to what is  and what isn`t acceptable as reasonable moral behaviour when it comes to paying your gardner,milkman,joiner or window cleaner in time honoured way ie in cash. If my researches are correct Mr DMG was appointed a director of Ivobank ltd on 1st March 2007 and served as such to 6th April 2009.  Ivobank Ltd partnered up with the online Betting giant Unibet to offer fast and secure cross border online payment and banking services to its clients and customers.

Ivobank specifically tailored its products and services to minimise costs for gaming merchants and gamers alike. Now correct me if I am wrong but there appear to be some inconsistencies in MR DMG attitude to cash based transactions now and the 2 years he served as a director of Ivobank. My experience tells me that the betting industry is awash with cash and as we all know HMRC currently "accept" that personal betting winnings (and losses) are outwith taxation and I wonder if Mr G has any thoughts on this for the future?

It would appear that the morality of attempting to profit from providing banking services to an industry that has a "checkered history" re compliace appears not to have been considered when the decision was made to accept that particular Directorship. I may be wrong of course as to motive and I believe it takes all sorts to make the world go round but the old adage of  people, glass houses and stones comes to mind.

PS the Bank de-registered with the FSA and changed its both its name and business more or less at the time of Mr DMG and other directors tendered their resignation.    

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By kenfrost
24th Jul 2012 13:18

Gauke is a hypocrite

Gauke may care to look at his own "morals" wrt tax avoidance et al.

http://hmrcisshite.blogspot.co.uk/2012/07/gaukes-moral-crusade.html

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By AndyC555
25th Jul 2012 11:29

HMRC manuals

I remember when HMRC manuals were first publish that there was an outcry about a line in the Enquiry Manual which said something along the lines  of "few traders in a cash business will be able to resist the temptation to put some cash in their back pocket rather than through the books".

 

After the outcry, the offending line was removed.  Seems Gauke has just put it back in.

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By User deleted
26th Jul 2012 20:27

Made me laugh anyway ...

... The Mail does print some good stuff!

“You told me it was morally wrong to pay the plumber in cash.”

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Philip Fisher
By Philip Fisher
27th Jul 2012 12:35

...... and the VAT?

Thank you OGA for providing some levity at the end of the week.

The real question that we must all ask after seeing this cartoon is whether the lady gave the extra 20% required by tax law?

 

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