Cash-in-hand will remain legitimate way of settling bills, says No 10
Cash-in-hand payments will remain a "legitimate" way of settling bills, despite calls for a move to electronic transactions to reduce opportunities to avoid tax, Downing Street has said.
The Taylor Report called on Chancellor Philip Hammond to use this autumn's Budget to unveil measures to clamp down on the "hidden economy", amid estimates that cash payments cost the Treasury £6.2 billion in uncollected tax each year.
The report's author Matthew Taylor said the Government should accredit certain electronic payment platforms to encourage the move to a cashless economy.
He suggested that use of approved methods could be made a condition of migrant workers' visas, to prevent them from taking cash payments for jobs.
Labour leader Jeremy Corbyn agreed it was "obviously" wrong for cash payments to be used as a means of avoiding tax, and said he would like to see the practice phased out.
But a Downing Street spokeswoman said she was not aware of any work within Government to make Britain a cashless economy.
She added: "We need to make sure that we are at the forefront of all the technology and innovation around making it easier to pay for things.
"But at the same time many people prefer to pay cash-in-hand and that is a legitimate way of paying for goods and services.
"There needs to be a balance so that people who prefer to pay cash-in-hand can continue to do that legitimately, and for people who prefer not to do that we have the technology and innovation to help them to do it."
The onus is on the person receiving a cash payment to ensure it is declared in the correct way, she said.
The Taylor Report cited HM Revenue and Customs figures suggesting that cash-in-hand payments to casual workers like gardeners, window cleaners or child-minders contribute to a hidden economy accounting for around 18% of the gap between amounts of tax due and the total paid.
While people hiring such workers may wish them to pay the appropriate tax, it is hard in practice for them to be sure that they do, said the report. As a result, "m any people inadvertently participate in the informal economy, something that is bad for taxpayers in general and unfair to the vast majority of self-employed people who pay their dues".
The report said: "The decision to become self-employed does not result in the individual opting out of wider society.
"I t is important that self-employed people pay the right taxes so that the country can afford to fund the NHS, the police and other national services."
A move towards digital transactions would create an audit trail to make it easier for tax liabilities to be pursued and would encourage a change of behaviour in those currently failing to pay the correct amount.
"Government should consider accrediting a range of platforms designed to support the move towards more cashless transactions with a view to increasing transparency of payments, supporting individuals to pay the right tax," Mr Taylor recommended.
" This could include linking an individual's right to work to a certain payment mechanism. This would not only allow the Government to have some oversight of the work being undertaken by those working under visas in the UK, but also give confidence to consumers that the people they are paying are legally entitled to work in the UK."
Asked whether he would back action to deal with the "hidden economy", Mr Corbyn said: "Cash-in-hand payments are often made to avoid tax, it's quite clear. Many businesses benefit from it, individuals benefit from it.
"Obviously it is wrong. If there is a tax to be paid - VAT or whatever - then it should be paid, and c ash-in-hand obviously avoids that. I want to see it phased out."
But he added: "I'm more concerned about serious levels of tax evasion and avoidance when large companies do a lot of business in Britain and make a great deal of money in retail and other sectors and then siphon those turnover and profits into low-tax regimes in order to avoid corporation tax."