The FT's Alphaville site features my work on tax evasion this morning. Access is free.
As they note:
According to tax campaigner Richard Murphy's new report, the annual "tax gap" in Europe caused by this illegal tax evasion is between €750bn and €900bn ($850bn-$1tn). That compares with estimates of between €50bn and €190bn a year for corporate tax avoidance, according to previous European Parliament estimates cited by Murphy.
The report was commissioned by the centre-left Socialists and Democrats Group in the European Parliament (which includes MEPs from Britain's Labour party and France's Socialist party), and only looks at the tax gap in Europe. But Murphy says the same trend can be seen all over the world -- the larger the shadow economy, the larger the gap is likely to be.
Murphy told us:
If you look at the whole tax gap, which is the total of tax unpaid which a government thinks should be paid, it's obvious that tax evasion is by far the biggest problem.
That's quite shocking for people. I think even the Socialists and Democrat Group were quite shocked, in a way, by the outcome. They found it hard to believe that it's actually evasion that's the biggest issue. And yet it is, because it's so commonplace. It's paying your cleaner in cash. It adds up when you think that you also paid your builder in cash, and your child's tutor.
There's more, here.
The finding is controversial. The focus of tax justice campaigning has been on tax avoidance for a long time. It requires a change of mindset to think that tax evasion is the bigger issue. Alex Cobham of the Tax Justice Network discusses that in the article. But as he says, even if I'm only 10% right ( and I am substantially more confident than that) this is a problem that has to be tackled.
So when is it going to happen?
The report is here.
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Paying the cleaner in cash is what has cost economies billions in tax evasion? It just never sounds like it’s a major thing in comparison to corporate tax evasion, but tax things are too complex for the likes of me to disentangle.
I really just wanted to draw your attention to this court case this morning – Theresa May is being called to court, on a civil case saying her triggering of A50 was illegal. I haven’t read much of it or investigated – but it is being live streamed from court at 10am so wanted to quickly bring it to your attention in case it’s of interest – link should all be on this Twitter feed:
Illegality of Brexit?
https://mobile.twitter.com/holgersdaughter/status/1098277182504341504
It’s not just cleaners
It’s vastly numbers of people skimming off the top parts of their income
Or all of it
And that’s much bigger than corporate tax avoidance
The comments section of the FT article raised some of the questions that I have, but I wasn’t sure I understood what the policy recommendation is. I pay my Italian tutor in cash for twice-weekly tutoring, and when I go on vacation I also pay her in cash to feed my cats. I’ve never asked if she pays taxes on that money, but I do know when she operated a small notions business here in town, she complained that other owners didn’t declare all their receipts for tax purposes while she did.
If she’s not paying taxes on the cash I pay her, how would government go about solving that problem? (Perhaps I should mention there is no more hated institution in Italy than the Guardia Finanza — the tax collection agency — which has a reputation for home invasion, false accusation, bullying, aggression, political manipulation, secret denunciation — behaviors despied during the Mussolini years)
Pay her by bank transfer
Why use cash?
Why not create an audit trail or you are implicit in the evasion?
What a great idea! I’ll do it tomorrow.
The right wing neoliberal mantra that tax is bad, and funds bad government and therefore it is a perverse civic duty to avoid paying tax is something that does trickle down through society’s income deciles.
Your previous piece on HMRC abjectly failing through lack of resource and or lack of a sense of purpose to collect tax due further reinforces the notion, much proffered by wealthy individuals, that paying tax is optional.
It’s been highly corrosive and continues to be.
The likelihood is that in most cases those being paid in cash are not huge earners, except for those in the illegal drugs trade. This is a “fairness” issue since the state could always over tax those it can assess easily in order to extract the desired amount out of the economy.
To address the fairness the state could dramatically reduce the amount of notes and coins in circulation and provide state run banking facilities and payment cards for individuals. Small businesses should also be offered free banking as many businesses accepting cash do so to avoid the bank transaction costs. Such a system would make it harder for criminals to process their income (in the absence of corruption at the bank) and ensure that individuals properly record their income and expenses. The state as the creator of money should use the technology available to better manage it.
Good ideas…..
I wish to address a confusion/fallacy of ‘cash’.
When as an employer we had a regular cleaner of the offices – a salt of the earth type – he insisted that he be paid weekly in cash every Friday, exactly the same amount. Even though everyone was on a monthly salary. He hadn’t ever got the concept of a monthly salary and new fangled direct debits and standing orders, even as he maintained some type of account for savings and emergencies.
He and the wife, paid their rent and bills in cash and did his weekly shopping etc. Always had. They knew exactly where they stood day to day. They always paid their taxes and bills on time.
Anyway – being an excellent and reliable gentleman – I made sure that he always had the exact same amount every friday – having then the extra calculation every month to make sure the correct taxes were accounted for on his monthly payslip!
Horses for courses. Some aren’t good with numbers. Cash payments does not mean automatic tax evasion or avoidance.
The insidious move to remove the physical tokens from society inevitably gives means of controlling peoples ability to spend their money when, where and on whatever they like.
Ultimately people being people we will undoubtedly invent whole new ‘street’ tokens to enable uncontrollable transactions – as cigarettes in prisons traditionally were.
They did not pay their taxes then….you did
And so you were not paying them in cash
You were paying them subject to PAYE
And that is not the issue….