David Gauke, the Treasury Minister, said that it is wrong to pay tradesman such as cleaners, plumbers, and builder’s cash in order to avoid paying taxes on their services. He argued that the practice comes at a large cost to Treasury and inadvertently in the future will mean that other people are going to end up paying more.
However, sources from the Treasury insist that Guake was actually answering just one question and not actually stating that he was going to change a policy. London Mayor Boris Johnson stated that if he were forced to pay cash in an effort to reduce costs he might because he does pay with cash in hand on a frequent basis.
Eric Pickles the Local Government secretary said that he never would. It is estimated that the government loses somewhere around two billion pounds every year since tradesman do not pay their income tax or VAT because they accept their payments off of the books.
Gauke told BBC Two that there is nothing wrong with the practice of paying in cash, but when people take advantage of it so that they can avoid paying taxes then it becomes a problem. He added that if a tradesman offers a discount to those who pay in cash then it is likely that they are doing so to avoid paying their taxes.
He explained that this is a large problem with the tax deficit because revenue is not being paid for correctly and this is a problem. While the person paying in cash may not be legally responsible, by encouraging them to do so they are morally responsible for the occurrence.
Gauke admitted that he does not know if other ministers have ever offered tradesman cash in return for a discount, but anyone that does this should be aware that they will have to pay more for taxes in the future as a result.
While most people are not going to like hearing that they have to pay more for a service at a time when their budgets are already tight, Gauke continues to reinforce that they will pay more later if they do not.