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Back to tax basics

24 July 2012

5:15 PM

24 July 2012

5:15 PM

David Gauke was only elected in 2005, but it’s impossible that he can’t remember the Back to Basics campaign, and how well that moral campaign worked out for the Conservative Party. Its 1993 launch precipitated revelations of all kinds of non-traditional behaviour in the party, from affairs to cash for questions. Had the Exchequer Secretary who bears the outstanding achievement of being named Tax Personality of the Year thought about the damningly long list of revelations that the Major government had to endure, he might have thought twice before declaring that it was ‘morally wrong’ to pay your plumber or cleaner cash-in-hand.

The problem with Gauke’s moralising was so obvious that it’s a wonder no-one pointed it out to him before his speech to Policy Exchange yesterday morning, or before he accepted the invitation to appear on Newsnight. If it didn’t then, it has now. I’ve had a very entertaining afternoon watching Twitter and the newswires updating with the MPs and ministers who ‘may have paid in cash’, or who ‘don’t dodge tax’ but can’t rule out having paid in cash. It’s the tax version of Back to Basics all over again: an open invitation to journalists with hands left idle by the parliamentary recess to probe every member of this parliament who might at some stage have given their plumber a wodge of cash.

There’s also a communication issue here: the discussion immediately became confused between paying cash-in-hand to avoid paying VAT, which isn’t just morally wrong but also illegal, and paying the full fee, VAT inclusive, but with cash. If you do the latter, you might still leave it open to a plumber or cleaner to evade tax by not declaring their earnings in cash, but you yourself are not breaking the law. But as with pasty-gate, that distinction gets lost and turns into what looks like an attack on the small people – the plumbers and the cleaners – rather than the big beasts avoiding millions of pounds worth of tax. In doing so, they’ve left the goal open for Ed Miliband, who duly scored this afternoon by saying ‘they should be clamping down on the large scale tax avoidance which has been revealed only in the past few days’.

The whole idea behind Gauke’s speech was to show that the Government is being tough on the rich by clamping down on tax avoidance after cutting the 50p rate of tax. But by going after cash-in-hand, he has accidentally made the message all about attacking normal people, not the super-rich. Everyone has paid cash-in-hand, so everyone will feel indignant with Gauke. The government is now back to where it was at the Budget.

Aside from a bit of sport about who has and hasn’t paid cash-in-hand and what that means, there’s a deeper problem here. In case ministers hadn’t noticed, they’re not priests, and they stand at a despatch box, not a pulpit. One of the purposes of government – big or small – is to stop people doing things that society agrees is wrong through laws. It then becomes not just wrong, but illegal. The difference between something being morally wrong and illegal is quite a big one, partly because different people have different morals. For instance, I think that it is morally wrong to buy food which you then leave to go off and I’ve given several unfortunate former housemates some very Gauke-esque lectures on the subject. Those former housemates, particularly those who had the misfortune to live with me at university, would argue that it is morally wrong not to do your fair share of the hoovering and washing up, which I spent much of my undergraduate life finding ingenious ways of avoiding.

But because society agrees that it is right to pay your share of taxes, the government makes laws to ensure that you do. If we agree that it is right to pay your share of tax (and that is very different to agreeing on what the fair share of tax is), then the Government’s job is to legislate, not lecture.

As Fraser pointed out when Jimmy Carr found himself in trouble over his legal tax avoidance, the really morally wrong thing is our complicated tax system. Abolishing what George Osborne described as a ‘spaghetti bowl’ and designing a new system which doesn’t require a whole battalion of lawyers and accountants to interpret would take the tax system back to basics in the best way possible for the government.

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