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Are 'cash in hand' payments morally wrong?

Laura Shannon on 24 July 2012 |

33 comments

An MP says that cash in hand payments cost the Government money and that everyone else pays more as a result. Do you agree?

Are 'cash in hand' payments morally wrong?

Treasury Minister David Gauke has told the BBC’s Newsnight programme that it is "morally wrong" for people to pay builders, plumbers and other tradespeople in cash.

The implicit accusation in his comments appears to be that anyone who accepts cash in hand is doing so to avoid paying VAT and income tax, keeping parts of their business ‘off the books’.

The Government estimates that it loses around £2 billion a year to this type of tax evasion. Mr Gauke said the real problem was households conspiring with tradespeople to get a discount if they pay with cash.

His comments are the latest in a long line from ministers as they try to clamp down on both tax evasion and tax avoidance.

What do you think of Mr Gauke's comments? Is it "morally wrong" to pay people in cash? Vote in our poll below.

And have your say in the Comments box below.

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Comments (33)

15

albbu said

What a bunch of Wazucks!!!!
Good kids claiming all household expenses, repair etc on parliamentary expenses and then claiming the accountants expenses to carry out "legitimate" tax avoidance schemes!!!
They really think the average person is as scheming and greedy as they are.
For Gods sake get rid of the Lords and half the MPs and get back to
responsible government!!

Report on 24 July 2012 | Love 6 loves
66

Hardtruth said

Did not see the interview but the minister seems muddled. Tax is the responsibility of the payee (contractor) not the payer (customer). Payer can pay up a contract however he or she chooses.
If contractor and customer collude to reduce the price by evading a tax payment then both are complicit but how could that be proven since there would be no paperwork? Even then the onus falls upon the contractor to file tax returns correctly.
Final comment in most cases the customer is paying out money that is already net of tax.
I would not expect this particular MP's career to go very far. He gives every impression of not being very good by making poorly judged comments in public.

Report on 24 July 2012 | Love 4 loves
33

T5P8 said

POLITICIANS should busy themselves CLOSING the loopholes not MOANING about plumbers and builders scraping a living.
Oh but it's their banker and executive friends at the other end of the spectrum using the loopholes and they don't want to upset them do they?

Report on 24 July 2012 | Love 5 loves
6

foz1145 said

Compare the loss between people down the bottom of the ladder and those at the top ---
HYPOCRITES

Report on 24 July 2012 | Love 5 loves
90

jonnie2thumbs said

Did not vote as there was no 'Income Tax is morally wrong' option

Report on 24 July 2012 | Love 5 loves
12

Qexit said

The politician in question seems to be overlooking the main reason tradespeople prefer cash payments which is to avoid handing over a chunk of money to the credit card companies, never mind HMRC, for the privilege. Also, does he seriously expect window cleaners and the like to use credit card or cheque payments for the small sums they charge ? I happily hand over the £3.80p in cash my window cleaner asks for once a fortnight.

Maybe the banks have said they will make a token effort towards cleaning up their act if the Government forces tradesmen to boost their profits by only accepting credit card payments.

Report on 24 July 2012 | Love 2 loves
12

Qexit said

P.S. Not forgetting that the MP making these statements is the same David Gauke MP who claimed £10248.32 expenses back from taxpayers to avoid paying the stamp duty and fees involved in the purchase of his home. So he hardly has any room to talk about whether anything involving Tax avoidance is morally wrong :-)

Report on 24 July 2012 | Love 5 loves
124

nosbort said

David Gauke may have a point as I suspect that anyone who negotiates a 'cash discount' that happens to be the same as the current VAT rate should suspect that the VAT is not going to be paid (or of course CT rate...). Having said that it is not the customer but the supplier/tradesman who is in the wrong and in any case Gauke used the wrong term, he said it was avoidance and it is out-and-out evasion. This debate never ceases to annoy me as people conflate avoidance (legal) with evasion (illegal). If Ministers can't get that right then they have no right to comment at all. I have no problems with tax evasion being pursued by HMRC and even avoidance schemes being checked to make sure that they are avoidance and not evasion but to lump avoidance and evasion together is wrong. The state have a number of tax avoidance schemes that they have set up (pensions, ISAs etc) so if Avoidance is suddenly wrong then all of these schemes have to go too.

Report on 24 July 2012 | Love 1 love
28

Justkeepgoing said

#Qexit
just for the record I now pay both my milkman and window cleaner by direct credit transfer to their bank account, at their choice, to avoid exhorbitant bank charges for processing cheques and cash. We are also likely to see more cashless small payments in the near future.
However I would had thought that the main reason for paying larger cash payments to tradesmen is to get a discount by avoiding VAT and in reality we should be more honest and pay up.
The thought of being told to do this by any MP is however laughable until they take action to ensure that all forms of tax avoidance by themselves and those with offshore accounts, expenses and clever accountants, are treated similarly. A few quid saved on a plumbers bill is nothing to the millions stolen from the treasury by the likes of the tory supporters.

Report on 24 July 2012 | Love 3 loves
54

sludgeguts said

Interesting subject.
Some time ago I was headhunted. The job would only give me 16 hours' work (on the books), I was then free to log as much cash in hand overtime as I wanted. I would also be able to sign on for benefits.
And this sort of scam is very common in certain professions.
Anyway. On the subject of tax and VAT. I truly believe that this (and previous) governments are corrupt - people complain about evil dictatorships etc - at least they screw over the public openly, ours do it all secretly, behind closed doors - and it's all legal and above board because THEY make the laws that say they can do it. They make their own wage rises whilst the rest of us scrimp and scrape a living.
They make an example out of Jimmy Carr whilst doing similar scams themselves.
The pittance I earn is taxed to the hilt. The few pennies I have left are not my own - everything I buy with them is overtaxed - fuel is 75% taxes (or thereabouts), other goods and services are also subjected to various taxes all the way through to the shelves - and then taxed again just for us. So even the taxes are subject to tax !
I can understand that a country needs to levy taxes in order to carry out some functions (our taxes pay police, fire etc etc) but we should not be using those taxes to pay for crazy things like housing asylum seekers or protecting the human rights of convicted criminals. We should not be using those taxes to give the workshy an easy life (and I lump all the government in that statement).
People taking money out of the public pot should not be earning ££stupid

Report on 24 July 2012 | Love 3 loves
17

nickthecrip2 said

Justkeepgoing-I completely agree with you. Of course it is morally, and legally, wrong to evade paying tax by paying cash. I suppose it is the 'little boy doing mischief' at work here as we all feel a little chuffed when we save a bit & think that the 'tax man' will have a little less!
But as you say, it is laughable when a politician starts preaching about 'morals'! In particular, a Conservative one, as well. If we take a VERY broad class thinking approach, working class vote Labour & high earners or upper class vote Tory, then most working class pay tax via PAYE while the Tory voters have enough income to use these tax avoidance schemes that are inaccessible to the rest. Pot, kettle, black, comes to mind!

Report on 24 July 2012 | Love 1 love
67

r said

"What a bunch of Wazucks!!!!" said @albbu. "For Gods sake get rid of the Lords and half the MPs and get back to responsible government!!"

Too true!

Then we have the short-sighted @Justkeepgoing saying "A few quid saved on a plumbers bill is nothing to the millions stolen from the treasury by the likes of the tory supporters."

and

@nickthecrip2 saying "while the Tory voters . . . . . etc etc ".

When are you lot going to realise that the Tories and Labour are just as bad as each other? Just look at Blair, Brown, Mandleson, Campbell as well as Cameron and Osborne - are you seriously telling everyone that some of these can be trusted???

The current government is still spending more than it receives, just as the last lot did, and it is going to be our children that have to pay for it. In the meantime, OUR savings are being eroded by ongoing inflation. Who is conning who?

The soon we stop paying for things we can't afford, the better. Then, we need a government who will represent the people, not one that is entrenched in traditional left/right politics. The sooner the blinkered mass wake up to this, the better of we will all be!

Look at the economies of Norway and Canada and, to some extent, Australia. They have governments that carry out the consensus wish, by and large, not ego-trip forays into the middle east and, for that matter, the EU.

r.

Report on 24 July 2012 | Love 0 loves
51

Ben Hall said

Politicians? A bunch of rogues! One of our greatest Prime Ministers, W E Gladstone, believed that income tax was an immoral tax.....as regards VAT, which is taxing money upon which tax has already been paid, well, it wouldn't have been countenanced by the politicians of his ilk.
It's another attack on the small trader, the home-worker, the pensioner.....anybody who is weak and easily mugged. The banker-robber-barons, of course, get more tax hand outs, while family men lose their children's allowances, pensioners lose the age related tax concessions, charities lose their special status, and the working man's pasty is taxed at point of sale.
When we're really and truly "all in this together" we might look again at the "black economy"..... While it's a struggling middle class being robbed and turned over, again and again, a lusty working class leeching benefits, and an upper class able to play magic accountancy dodges, it's very tempting to look on cash down deals very favourably.....

Report on 24 July 2012 | Love 2 loves
38

OorWullie said

What is more interesting, I made comment on this subject yet it has been removed without explanation; is this censorship morally correct?

Report on 24 July 2012 | Love 0 loves
5

Simon Ward said

OorWullie,
No-one at this end has removed any comment from this article.
Simon
News Editor

Report on 24 July 2012 | Love 0 loves
4

GaryKD said

About as morally wrong as fiddling expenses! We should appoint Bob Diamond to re-investigate MP's expenses!

Report on 24 July 2012 | Love 1 love
92

LastChip said

Let's turn it around.
If the tax take in this Country wasn't as outrageously high as it is, perhaps people wouldn't be tempted.
Or maybe they would. It's called human nature!
This MP needs to get a grip on reality and as others have already commented, he's hardly in a position to preach the high morel ground.
He's simply substantiated my claims, that most (if not all) MP's are morons.

Report on 24 July 2012 | Love 1 love
17

nickthecrip2 said

r said, wasn't making any point about the difference between Labour & Tories as I don't think that there IS any difference between them. The point I was making, or trying to!, was that those paying via PAYE have no choice about the way they pay tax but that the 'higher earners' do have a choice (it seems!).

Report on 24 July 2012 | Love 0 loves
4

GaryKD said

I'm very much from a working class background but didn't like the things that Labour seemed to stand for when I could first vote in a General Election (1976) and have either voted Conservative, or not bothered, ever since. It's easy to give Cameron & Clegg a thumping (although they have dropped a clanger or three), but we have to remember that the problems that are besetting us are worldwide and, because Labour spent all the money during the boom, they have very little wriggle room! The normal economic mantra is save and reduce debt during a boom and spend, spend, spend during a recession!

Report on 24 July 2012 | Love 0 loves
599

Mike10613 said

According to the Guardian the rich are stashing trillions abroad and to distract attention they make accusations against hard working tradesmen. I pay my gardener in cash; he gives me a receipt. Good enough?
Now can we have an investigation into tax evasion and avoidance?
http://www.guardian.co.uk/business/2012/jul/21/global-elite-tax-offshore-economy?CMP=twt_gu

Report on 24 July 2012 | Love 1 love
362

CuNNaXXa said

Lets be honest. There are plenty of tradesmen who are struggling, as are many other working class people. What with the supermarkets screwing us over food prices (the recession has been a boon for the big four), the government screwing us over fuel duty, and employers using the recession to restrict inflation based pay rises (yes, many employers used the recession to save themselves a packet), it is no wonder that the common man and woman are looking to save a few quid.
So, why do the rich expect the poor to carry the burden of taxation? Well, they are rich, which is explanation enough. The more you have, the less you want to lose. When you have nothing, or hardly anything, you have little or nothing to lose.
Many honest tradesmen have gone out of business because they have played fair, so it is understandable that those who are still trading are looking at any angle to keep afloat.
So, here is a moral question for all you motorists. If you were offered some cheap red diesel, would you buy it and take a chance that the rozzers didn't catch you using it, or would you steer clear just because it was the 'right thing to do'?

Report on 24 July 2012 | Love 2 loves
7

babyhk said

With many jobs paying the min wage if you can get one there are plenty of local cleaners , odd job men near me. My mums cleaner charges £8.00 per hour and works really hard. She drives to my mums house with her own hoover etc and it 's all my mum can afford to pay as she has tried agencies who are more expensive and not as good . With childcare so expensive who can deny people trying to make a few bob .I am sure with the amount of tax this woman would have to pay the country won't fall down .... or perhaps Mum should apply to Social Services for a home help which would cost the state considerably more.

Report on 24 July 2012 | Love 0 loves
9

g1ng3rcat said

What about the millions of people (like myself) who don"t own a chequebook? Why the assumption that we are all trying to defraud the taxman?

Report on 24 July 2012 | Love 0 loves
8

dilbert999 said

Over the years, successive governments have got rid of the reliefs which allowed ordinary PAYE taxpayers to reduce the amount of tax they pay, such as mortgage interest relief, or life assurance premium relief. Small wonder then that they turn to the only means they have, albeit illegal, of paying cash in hand to reduce their tax burden.

Report on 24 July 2012 | Love 1 love
8

dilbert999 said

nosbort:
" Having said that it is not the customer but the supplier/tradesman who is in the wrong"
I don't think that's necessarily true. According to the Proceeds of Crime Act 2002:
Section 242 “Property obtained through unlawful conduct”
(1)A person obtains property through unlawful conduct (whether his own conduct or another’s) if he obtains property by or in return for the conduct.
So if you agree with a tradesman to avoid VAT by paying cash and thereby obtain property (a reduction in the price quoted for the job), you've obtained property through unlawful conduct (even though it was the supplier's) and would therefore presumably be subject to a criminal penalty.

Report on 25 July 2012 | Love 0 loves
28

Justkeepgoing said

Quote # r
"Then we have the short-sighted @Justkeepgoing saying "A few quid saved on a plumbers bill is nothing to the millions stolen from the treasury by the likes of the tory supporters."
...When are you lot going to realise that the Tories and Labour are just as bad as each other? Just look at Blair, Brown, Mandleson, Campbell as well as Cameron and Osborne - are you seriously telling everyone that some of these can be trusted???"
For clarity I did say tory not Tory nor Conservative. I was refering to the political nature rather than any individual party, in my view New Labour is in reality New Tory. The Coalition is simply doing what both parties have alway done individually amounting to middle class self interest.
In reality it remains that the governments that we elect determine the rules concerning taxation and should be fair (if only that were true). As responsible citizens we should all pay our due share. Unfortunately not only have the tories ensured that high income is not progressively taxed, as it should be, but that they should pay less by "efficient" schemes, off shore accounting, grossly illiberal expenses, bonuses and anything else a right society would call fraud.

Report on 25 July 2012 | Love 0 loves
265

oldhenry said

Nobody , anymore, takes a politician's utterances for anything other than crap. This applies totally in this case. To expect the population of the country to police the Revenue's role of tax collection is preposterous in the extreme, and also rather desperate.
My view is for the MP to get on to Vodoafone and get them to pay the millions of tax they were let off by the government's servant, and then get on to Goldmans Sachs to pay the tax they were let off.
When that is safely in the coffers of Her Majesty, I will deign to consider the cash payment to traders and professionals.

Report on 25 July 2012 | Love 1 love
10

philippasutton said

I think that this particular spokesman has got himself into a pickle, by equating two different groups of people.
The first is that of the tradesman - plumber, roofer - who works on a "for cash" basis. These people, and their clients, know that the person concerned is avoiding paying income tax (and most substantially VAT) on money paid to them and (usually) offering a hidden discount to the customer as a result. They are often in direct competition with "legitimate" businesses who pay business taxes, fill in VAT returns and pay their own workers via a system which also reports to the HMRC. The tradesman, and usually the customer, knows that this is a fiddle, and that this sector of the economy does keep a significant amount of revenue from the Treasury. When the customer conspires with this process they too are doing something not only morally reprehensible, but illegal.
I think that David Gault was talking as if colluding in this process was what he was condemning. It's not something which is very controversial - aside from those who feel that they are entitled to cheat the Treasury because they think the Treasury is not entitled to the money anyway, regardless of the legality of the process.
However, Gault's swathing generalities includes rather more than I think he would want to defend if faced with an irate constituent. His comments do suggest that anyone who gives a retired neighbour a tenner once a month for weeding their garden is similarly colluding in a tax fiddle, and we should feel guilty about it. Here too the law is on his side. If the neighbour is not filling in an income tax form and declaring that tenner, then they are probably breaking the law - especially if their income is above the level where they are required to pay tax on it. If they do the same thing for several neighbours, then the questions become even harder as they are essentially running a business.
However, I'm not sure how grateful HMRC are going to be if everyone who gets a tenner for mowing a lawn starts filling in income tax forms - complete with claims for expenses etc. It would probably cost HMRC more in admin costs than it would raise in revenue.
I am certain that the vast economy of occasional windows cleaners, handymen, babysitters, gardeners and home helps runs mainly on cash in hand and no questions asked. When that becomes someone who is running a gardening business and claiming JSA we have moved once again into the realm of the fraudulent. But if you are a student raising an extra few quid helping out in a neighbour's home, then it is hard to see either how that seems morally wrong or how the electorate at large are going to be very keen on bringing that level of work into the world of taxmen and accountants.
It might, of course, make for a world where this sort of work has always to go through an agency - and they will need to keep records and pay cash. And all those people who keep going on an extra £20 a week for a bit of cleaning will just have to manage without. Unlike those who can afford accountants.

Report on 26 July 2012 | Love 2 loves
362

CuNNaXXa said

philippasutton has made quite a good argument for what could only be described as a rational cut off point.
Basically, if you earn a little extra money, you are legally required to declare it, but the cost of reporting it, along with reporting what could be construed as an insignificant amount, would probably cost more to process than the money recovered in taxation.
Maybe the HMRC should announce a limit to how much you can earn in addition to your main income, per annum, before you are required to declare it. After all, why would I want to fill in a tax return if I only earned an additional 10p during 2011/12.
I know that the HMRC are charged with collecting taxes, but sometimes we need to use a smattering of common sense. If someone pays tax on £20,000 a year, who in their right mind is going to chase them for tax on an additional £100 a year that they might earn cutting a few lawns for cash.
Also, tax evasion and avoidance only partly works, because someone may avoid tax on income, but then they have to pay it when spending it, and if they can avoid VAT as well, those people further down the line, such as employees paid using such funds, will pay income tax and VAT.
So, in reality, tax cannot be avoided because as soon as we spend it, it becomes another wage or salary, and becomes taxable again.
Money is taxed time and time again until it dwindles to nothing.

Report on 26 July 2012 | Love 1 love
5

suemalling said

Given the costs charged for processing credit card payments, I cannot see why tradespeople should not get paid in cash for smaller jobs (by the way, does a cheque constitute cash?) Also, is it morally acceptable for large companies to deliberately delay payment to subcontractors for several months beyond the due date, as was the policy at one large company I worked for? And how about the moral acceptability of the trillions of pounds/dollars allegedly held by rich individuals of many nationalities in offshore accounts around the world that apparently exceed the combined values of the economies of the USA and Japan?

Report on 27 July 2012 | Love 1 love
362

CuNNaXXa said

It is morally wrong for an MP, or the PM, to try and sting his rich mates when he can pass the burden on to the common man. After all, MPs rely on their rich mates to fund their election campaigns for them, so they are hardly going to penalise the very people who help them on to the gravy train.

Sorry to be so cynical, but that is how it appears to this common man.

Report on 27 July 2012 | Love 1 love
0

mr.spence said

Well I see from the votes that only 10% of the people polled here want the Builders/Gardeners/Plumbers/Carpenters/electricians and handymen to pay tax.
"Everyone pays tax", what a much generised statement, when in fact sum do and most do not and those that do are the one's in the ring fence of PAYE, or put another way, those that are caught in the net. The rest, Businessmen/women, self employed and migrants pay as little as possible, some paying zilch!
So, what's right and what's wrong, well, listen to the goverment and they would tell you one story and if you listen to that poor builder he will tell you another, but the bottom line here is that life is "never going to be fair", so get used to it and suck it up.
I am of the opinion that if every man,woman,child and foriegn undeclared grey import, yes, I mean you the one taking cash and should'nt be here working in the UK at all - it would not make any difference to a single one of us.
The Goverment would continue to squeeze and suck as much as they could from us, crying that the Health Service or some Train Company needed to rip out it's engines and spend a Billion pounds to run on electric or we needed to lend the Eurozone money or some other important item like decorating an MP's second home.
I spent a decade dealing with local Authorities and Goverment and the one thing I do know is their take on money - it's not their's and they do part with it so easily.
I close by going back to the original question, does anyone think they get a discount by paying in cash, are people realy that deluded?
Baaa for now.
mr.spence Property Developer

Report on 18 August 2012 | Love 0 loves
46

Henry-GBG said

Taxes on earned incomes are what is morally wrong. What is the difference between people paying for each other's services with money and exchanging the services for benefits in kind?

Report on 11 January 2013 | Love 1 love

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