Is David Gauke so wrong on tax morality?

Many on the right have been quick to berate David Gauke for his comments on "cash-in-hand" payment. But is he really so wrong?

Does David Gauke have a point?
James Dowling
On 25 July 2012 09:13

I confess to have been rather confused by the prevailing reaction to David Gauke’s comments on payment of builders with cash. My confusion actually started on this issue with Cameron’s comments on Jimmy Carr’s tax avoidance – now a number of weeks past – of which this somewhat bizarre summer storm appears to be an attempt to resurrect.

Cameron’s decision to condemn Carr’s tax arrangements as morally wrong (as well as ill-advised), occasioned a storm of protest from across the political spectrum – with the right-wing press, in particular, suggesting that Cameron is somehow going too far in dragging morality into this.

We now appear to have a similar fiasco with David Gauke’s comments. Consequently, on one hand, we have the same slightly confused commentators who got into a flap over Cameron’s comments somehow suggesting that tax planning, avoidance and, seemingly, evasion are all the same thing. These commentators argue that we should not be condemning any of them, and that to do so is hypocrisy (see Guido and James Kirkup).

On the other, some seem to think that this amounts to a new statement of policy, and that HMRC are now going to be roving DIY shops and checkatrade,  forcing everyone to pay for their new kitchen via direct debit (see the comments by Austin Mitchell, or this somewhat hysterical article by Cristina Odone). This is all complete idiocy.

Allow me to declare an interest. I like David Gauke – he is a talented and genuinely knowledgeable Minister whom I know slightly, having worked with him while in the Treasury. I was also in the audience when he made his speech to Policy Exchange.

The point he was making was a simple one – basically, that we all know when we pay tradesmen in cash that we are likely getting a better rate due to the fact that we are evading VAT. If the general population is well-educated enough to know that this is behaviour that is morally in a rather grey area, Government and the tax profession should be aiming to ensure a similar level of awareness when it comes to dealing with unscrupulous tax advisers who offer their clients seemingly risk-free ways to dramatically lower their tax bills.

In questions afterwards, someone asked him about whether HMRC should be doing more on VAT evasion. His answer was unremarkable, and certainly did not suggest any change in HMRC practice from the current.

If he suggested that evading VAT by paying in cash is morally wrong, I don’t recall – but, frankly, it’s not a comment I would have a problem with. Although I dislike the language of morality, in the rather simplistic way I think about these things, breaking the law (tax evasion is criminal) and, in so doing, imposing costs on the wider community is highly questionable practice.

In the wake of the Jimmy Carr Affair, Digby Jones, on Murnaghan on Sunday, suggested that there was a certain amount of hypocrisy at play.  It is perfectly reasonable to ask who would refuse when confronted with an adviser telling them they could perfectly legally reduce their tax bill to 1 percent.

You might well ask the same question, as some have today, of a stretched householder faced with making significant savings on the cost of their building work if they only pay in cash. I have some sympathy with that view. However, if true, this raises a question around the practices of both Jimmy Carr’s accountant and certain building firms - which you would hope the relevant professional bodies will be looking into.

However, it does not by itself make the practice suddenly okay – just excusable. It also suggests, as David Gauke was trying to say, that we would all be much better off if we understood what a dubious proposition looked like when we saw it.  

Also post-Jimmy Carr, certain right wing commentators (notably Ryan Bourne, Dan Hannan or Peter Mullen) went into print implying that a lot of the language of morality was left-leaning sanctimony from statists who view the state as the arbiter of morality and look down their noses at anyone who wants to operate in a tax efficient manner.

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