Public fury over Treasury’s tax morality lecture

Mr Gauke took to the moral high ground on Monday with his comments about the UK’s ordinary tax dodgers; the little guy whose tax avoidance “deprives” the public purse of £2bn a year.

Mr Gauke told the Telegraph newspaper that getting a discount by paying in cash for paying for a plumber was “morally wrong. It is illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash.”

His emotive language has certainly hit a nerve, enraging tradesmen and triggering an avalanche of derisive comments. At one point, Mr Gauke even found himself perhaps the first UK treasury minister in history to be “trending” on Twitter – and for all of the wrong reasons.

“I wonder how many MPs are still getting ‘Brown Envelopes”” tweeted Jim Paterson after Channel 4 News asked online readers whether cash- for-service was morally wrong.

@Channel4News I wonder how many MPs are still getting “Brown Envelops”

— jim paterson (@gjpaterson) July 24, 2012

“Yes, but I’m more worried about how much off-shore accounts, in tax havens, that hold British money, is costing the country” John McNally responded.

“How much did the fraudulent banks cost the UK?” asked eion cartledge (sic).

“Maybe Mrs Gauke could tell us? She’s a tax avoidance lawyer after all,” Wanda Opalinska tweeted.

For the record Mrs Gauke – aka Linklaters-trained solicitor Rachel Gauke – does specialise in corporate tax law. In other words, she is trained to offer legal tax avoidance advice to large companies.

Speaking to Channel 4 News on Tuesday, Deputy Prime Minister Nick Clegg said he thought he had paid tradesmen in cash in the past, but not in order to avoid tax.

@cathynewman @MichaelLCrick – Just lost contract because we would not take cash in hand!

— IWantToBePM (@IWantToBePM) July 24, 2012

On Monday the Revenue welcomed the jailing of a Surrey plumber who evaded £50,000 in income tax. Melvyn Careswell, 49, from Epsom, was sentenced to 12 months in prison. But according to a report by the British group Tax Justice Network the global rich hide between $21 trillion and $32 trillion in offshore tax havens.

Losses debatable

So does the government really lose some £2bn a year through cash payments? Channel 4 FactCheck took a look and concluded “as so often when big scary numbers dominate the headlines, when you peel away the layers of the onion, there’s nothing in the middle”. Read the full analysis here: Spotlight on the black economy.

Some Channel 4 online readers found Mr Guake’s stance particularly annoying as it came after revelations that investment bankers Goldman Sachs – whose boss once claimed to do “God’s work” – struck a sweetheart deal with Her Majesty’s Revenue & Customs that allowed the bank to avoid paying up to £20m in a confidential deal that came to light only because of a whistleblower.

Hypocrisy, anyone?

So, Mr Gauke’s stance left many today wondering: is it morally right for banks and large companies to avoid tax but wrong to pay your cleaner £10 cash for an hour’s hard graft?

“Perhaps it is ‘morally wrong’ to try to redirect attention from tax havens,” Gareth Hughes tweeted to Channel 4.

“No, but I do think fraudulent expenses claims and banks ripping us off is,” said Geri McDonnell.

“That’s less than the govt let Goldman Sachs, Vodafone off their tax bill. So no,” Alex ‘J’ May tweeted to Channel 4.

“Trying to deflect from real scroungers – bankers and tax evaders. You won’t deceive many of us!” dyannesty (sic) tweeted.

@Channel4News am getting v fed up of this story. all workers u mention prob would not do enough hrs a week on average over a yr to pay tax!

— lauzjp (@lauzjp) July 24, 2012

The £5 billion hole

Last year, HMRC collected £474 bn in tax. The tax gap – the difference between what is owed and what is collected – was about £35bn. Tax avoidance (as opposed to illegal tax evasion, the hidden economy, etc) accounted for 14 per cent of this gap – around £5bn or about 1 per cent of total liabilities.

That’s a substantial loss for any government, but British tradesmen found Mr Gauke’s focus on them to be rather self-serving.

“The reality is that there is little or no alternative to cash payments for many tradesmen, and criticising the whole industry belies a misunderstanding of the situation many customers and tradesmen are in,” said Tariq Dag Khan, from Rated People, a website that recommends tradesmen.

Tweeter Gary Moir agreed: “For some people it’s greed but for most it’s survival.”

‘The bigger sin’

Not every one of the 100-plus online readers who bombarded Channel 4 with responses within an hour had the knife sharpened for Mr Gauke. About five per cent of the comments were supportive.

“I’m (a) redundant local government worker & now freelance gardener. I declare all earnings and expect others to do the same.” said Martin Willis.

“Anyone who evades tax is breaking the law. Cannot justify illegal activity by saying it is just small scale,” tweeted Gillian Craigie.

But the overwhelming majority disparaged Mr Gauke.

“Can we focus on bigger sin: Tax avoidance by the very rich?” David Sharpe tweeted.