Bill Carmichael: Taxing questions for Labour over cash-in-hand

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SO Labour’s great crusade against wealthy tax dodgers ended up targeting window cleaners and babysitters who accept cash-in-hand without writing a receipt.

Shadow Chancellor Ed Balls seemed clear where the real problem lay – not with rich hedge fund managers, but with hedge trimmers who work for cash.

“The right thing to do if you are having somebody cut your hedge for a tenner is to make sure they give you their name and address and a receipt and a record for the fact that you have paid them,” said the MP for Morley and Outwood.

Seriously? So if you ask next door’s teenage daughter to keep an eye on the children for a couple of hours, you are supposed to demand a receipt?

What if you pop into the local for a couple of pints and then have a bag of chips on the way home? More receipts? The same for a newspaper or a cup of coffee?

What if you tip a few quid to the taxi driver, the hairdresser or the barman? “Have one yourself mate – but could I have a receipt with your name and address on it?”

If, like Ed Balls and his MP wife Yvette Cooper, your household costs are covered in part by your Parliamentary expenses, this may make some sense. But to anyone living in the real world the idea is clearly bonkers.

Labour has got itself into this mess because it deliberately tried to obscure the distinction between tax avoidance, which is legal, and tax evasion, which isn’t.

Tax avoidance is using any legal means of reducing your tax bill and we all do it. If you have ever paid money into an ISA or a pension, or if you have donated money to a charity through Gift Aid or bought a bottle of Scotch at a duty-free shop, then you have indulged in tax avoidance.

For example, the Deed of Variation taken out by Ed Miliband’s family was a clever – and entirely legal – way of potentially reducing inheritance tax.

In contrast tax evasion is a criminal offence punishable by fines and prison sentences.

But Labour smudged this dividing line in its desire to whip up hysteria about “tax dodgers”.

Paying tax is not a moral judgement. You are obliged to obey the law and pay what you owe – but not a penny more.

And if you can find ways within the rules of reducing your tax bill – well, more power to your elbow.

Of course, there are wealthy people who go to extraordinary lengths to avoid paying tax. Clever accountants are constantly searching for loopholes to help the rich salt away money out of reach of HMRC.

But the answer to this isn’t to incite the mob and demand higher taxes. More regulation won’t work either – those clever accountants will always find another loophole.

The solution lies in simpler and lower taxes. And guess what happens when you lower taxes? Odd as it may seem, the tax take – the amount collected by the Government – actually goes up and the rich end up paying more.

Church of hypocrisy

It’s all Margaret Thatcher’s fault apparently.

What is? Well, if you are on the Left, pretty much anything – despite the fact the Baroness died in 2013 and last wielded power a quarter of a century ago.

But this time it isn’t the Labour Party or the trade unions traducing the memory of Britain’s first female Prime Minister, but the Church of England’s House of Bishops.

In a left-wing manifesto issued this week, the bishops blamed the free market ideas championed by Baroness Thatcher for entrenching inequality between rich and poor.

This is nonsense. Wherever free markets have been allowed to flourish in the world the result has been a rapid growth in prosperity that has particularly benefited the poorest.

In the UK for example between 1977 and 2012, the incomes of the poorest fifth of the population rose by 93 per cent.

Meanwhile the fabulously wealthy Church of England pays its workers poverty salaries that are so low they would make the most rapacious capitalist blush with shame.

A curate earns little more than £16,000 and a vicar about £22,000.

To quote the Bible: “Thou hypocrite, first cast out the beam out of thine own eye, and then shalt thou see clearly to cast out the mote out of thy brother’s eye.”