Cash jobs = tax evasion

Inland Revenue are having another crack at discouraging cash jobs. Avoiding paying GST and income tax is blatant tax evasion, but there has been a general acceptance of it as fair game by many.

It’s not fair on businesses who do things by the book and can’t compete on price. And it’s not fair on those who ‘pay their fair share’.

One News has done a bit of investigating and reports Growing blackmarket in renovations sparks IRD crackdown on tradies doing cashies

A ONE News investigation has revealed a thriving blackmarket in the renovation trade, which is expanding in scale.

They haven’t revealed it, it is well known that it goes on, but they are helping highlight the problem.

We took one Auckland house badly in need of repair and we asked six tradesmen, chosen at random, to quote us for fitting a new bathroom and kitchen, re-painting and installing new carpet.

The work would be valued at between $10,000 and $20,000 depending on the scope of the work quoted by each tradesman.

Fifty per cent of tradesmen provided a cash price, without being asked – and their quotes ranged in value from $10,000 to $18,000.

Apart from cheating the system – and cheating those of us who pay all our income tax via PAYE and pay GST via our purchases – I think it’s very risky paying that amount of tax for that size of job. People who offer cash jobs are more likely to be shady and you are less likely to be protected if something goes wrong.

So who is breaking the law when a cash price is negotiated?

Andrew Stott from Inland Revenue says it’s “the tradesperson breaking the law – the tradesperson is responsible for paying taxes on their income,” while for the consumer “it’s not illegal to pay cash – it’s just silly”.

It’s more than silly. If you pay cash for goods or services knowing that tax evasion is likely then you are aiding and abetting it.

The Inland Revenue is today launching a crackdown on tradies doing cashies, their third campaign in Auckland and Christchurch.

Mr Stott’s advice to anyone doing work for cash and not paying tax is simple.

“Watch out. The holes you can hide this sort of money in are becoming smaller and smaller and we are constantly finding people.  A second piece of advice is just think about your part in New Zealand and your part in your industry, and play your part.”

If GST evasion was eliminated then for the same level of tax take the GST rate could be reduced.

From a few years ago: Cash jobs, crime drive black economy

Cash trade jobs, crimes, wages under the table and online trading are costing the Government more than $7 billion a year in lost tax.

That’s unpaid tax that us tax payers have to subsidise, about 10% of tax revenue.

How much do we pay? If we are on about an average income of $60,000:

taxpaid60000

You can check this for different incomes at My Tax Dollars.

That’s just income tax, add GST and it will be closer to $15,000 in tax per year for an average earner (that doesn’t get Working for Families accommodation subsidies).

Those who evade GST and income tax mean the average income earner pays perhaps 10% more than their fair share, or around $15,000 per year, or about $30 per week, because of dishonest people.

If tax evasion was reduced, and honest tax rates were reduced, there would be less need for WFF type subsidies.

Cash jobs = tax evasion

It costs a honest people a significant amount amount of money.

Leave a comment

28 Comments

  1. Blazer

     /  19th September 2016

    I understood the aussies solved this problem by putting the onus on the person requiring the work to be accountable for any tax.Good to see IRD leap into action,just like the Govt have done re implementing the Shewan report…*!

    Reply
    • David

       /  19th September 2016

      How on earth would you get a householder getting a small job done at home be responsible for the tradie paying the right tax, no wonder the Aussies look over here and hope Key can take over and run the place properly after he is done here.

      Reply
  2. David

     /  19th September 2016

    They should have a look at Dairies I have yet to see my local guy use his till ever and he built a beautiful 2 story house just round the corner from me, suppose he may have won lotto. You could pretty much hit every Indian and Chinese restaurant but oh no we cant have that lets smack the hard working tradie instead.
    The SFO warned about new migrants bringing their home business practices here which we see regularly in the court pages.

    Reply
    • Kitty Catkin

       /  19th September 2016

      I haven’t seen this very often. The modern tills don’t make as much noise as the old ones.Maybe you haven’t noticed. If someone was doing this on a large scale, they’d be found out.

      The accusation against all restaurants is grossly unjust unless you have evidence.

      A girl I knew was instructed by her boss-an Englishman-to add so much onto large orders, as people wouldn’t notice. She refused and resigned. I have been shortchanged, but not by Asians, as it happens. I was ripped off by an English handyman and have never had him do anything since. Likewise a Kiwi plumber-again, once only. If they do you once, that’s their fault, if they do you twice, it’s yours.

      An Austrian caterer in Wellington not only didn’t let casual workers take a break, he took 30 minutes of pay off for the non-break. He probably reasoned that there were plenty more where we came from and that the small amount of money involved would mean that we wouldn’t bother to do anything about this as it would be more trouble than it was worth. He was right.

      Reply
      • Kitty Catkin

         /  22nd September 2016

        Three people must think that these dishonest practices are acceptable. How odd.

        Reply
  3. Bill

     /  19th September 2016

    Winston Peters pointed out an interesting fact a bit earlier in the year, while talking about Tobacco.
    “The government charges multinationals the pitiful amount of less than half one percent taxation”.

    Allowing multinationals such low rates, it would seem the Government runs its own Black-Market to some extent.

    Reply
    • Kitty Catkin

       /  19th September 2016

      It’s not a black market if it’s open and above board-and do we know that WP is right about this.

      Reply
      • Kitty Catkin

         /  19th September 2016

        ?

        Reply
        • Bill

           /  19th September 2016

          Not open to just anyone, you may have to be a film studio or a tobacco company just to be invited to the table.

          Reply
          • Kitty Catkin

             /  22nd September 2016

            A black market by definition is hidden; this isn’t. Black market is illegal; this isn’t.

            If it’s legal, it’s not black market, it can’t be. They aren’t.

            Reply
  4. Alan Wilkinson

     /  19th September 2016

    Tax is a huge brake on the legal economy in many parts of rural places for example in Northland. Consequentially what does get done is mostly via barter or cash – otherwise it simply wouldn’t happen. And an awful lot doesn’t happen. That is the real story of tax avoidance here and nobody does anything about it.

    Reply
    • Blazer

       /  19th September 2016

      avoidance is alright,its evasion thats …bad…remember!

      Reply
      • Alan Wilkinson

         /  19th September 2016

        Only if you get caught. Otherwise it is profitable. And avoidance can anyway now be deemed evasion at will by the IRD.

        Reply
        • Blazer

           /  19th September 2016

          Tradesmen will just have to work for nothing and all monies recieved as donations be put into a charitable trust.

          Reply
    • Bill

       /  19th September 2016

      Yeah Al, I agree on this point and would add that any money made from Cannabis still finds its way into local business’ and GST is paid. At 15% and not being able to claim back expenses that’s 15% of every dollar spent. When your for cash tradies spend their bucks on anything legit they pay as well, no one, is paying no Tax. Except maybe multinationals.

      Reply
  5. Corky

     /  19th September 2016

    Great stuff, One News. There’s a myriad of serious issues out there needing in depth investigation. So, what does One News do? Provide evidence to the government we need a cashless society. Great One, One News, you morons.

    Reply
    • Bill

       /  19th September 2016

      This is probably their intent, nothing would make them happier than to pull off a cashless society.

      Reply
  6. Bill

     /  19th September 2016

    TV ONE is the GOVERNMENT.

    Reply
    • Bill

       /  19th September 2016

      They didn’t pay for beneficiaries, free view boxes and aerials at digital roll out time to watch sponge bob.

      TV is used to shape our thinking, how would we see car crash adds and their other social modification tools.

      Reply
  7. patupaiarehe

     /  20th September 2016

    IMHO picking on the hardworking tradies is unfair, if they are going to continue to turn a blind eye to what the multinationals are up to. Hammer the little guy, while the big boys transfer their profits overseas, simply because he is an easier target.

    Reply

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