Ed Balls has been accused by the Tories of showing a "complete lack of understanding" about business after suggesting people should collect receipts from gardeners and cleaners for cash-in-hand jobs as a way to ensure no tax is avoided.
Appearing on BBC Radio 5 Live's Pienaar's Politics, the shadow chancellor said: "They've [tradesmen] got the legal obligation to make sure they pay their taxes if it's that kind of transaction - but I think the sensible thing for anybody is that you've got a record of it and you've done it properly."
Work and Pensions Secretary Iain Duncan Smith said it was "absurd", adding: "If you have a one-off payment for something and you pay cash, I shouldn't think anybody in the country does that necessarily".
However, Duncan Smith's attack marks a change from the Tories' stance back in 2012, when Treasury minister David Gauke warned that paying tradesmen in cash was "morally wrong", a message that forced senior coalition ministers to admit they had done this sort of payment too. Duncan Smith also admitted to Radio 5 to paying tradesman cash in hand for "odd jobs".
Gauke, told the Daily Telegraph: “Getting a discount with your plumber by paying cash in hand is something that is a big cost to the Revenue and means others have to pay more in tax.
“I think it is morally wrong. It is illegal for the plumber but it is pretty implicit in those circumstances that there is a reason why there is a discount for cash. That is a large part of the hidden economy.”
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He was supported in this attack by Dave Harnett, then permanent secretary of HMRC, who told the newspaper: “Tax provides the funding to run the country: hospitals, schools and everything else. Every time someone pays cash in order not to pay VAT, the nation gets diddled.”
The Huffington Post UK has asked the Treasury minister for his view on Balls' comments, but has yet to receive a reply. HMRC guidelines state that cash-in-hand payments "are like any other income" and "must be declared" to the taxman.
Well this is Gaukward RT @asabenn: @DavidGauke Hi David, is Balls right to say getting a receipt from tradesmen is the "right thing to do"?
— Alex Wickham (@WikiGuido) February 16, 2015
Gauke's attack on cash-in-hand payments led to a series of embarrassing admissions by cabinet ministers, including David Cameron, Nick Clegg and Boris Johnson, who insisted they had not condoned the non-payment of taxes by tradespeople working off the books.
An aide to the Prime Minister said that he "has never paid anyone in cash to get a discount", adding: "He may have paid in cash but he has never paid at any time in his life to help them evade their share of tax.”
Meanwhile, a senior Liberal Democrat source said: “Nick Clegg has occasionally paid cash in hand but not for the purposes of allowing someone to avoid tax or in exchange for a lower price.”
The London Mayor was more forthcoming about how he paid tradesman, saying: "I've certainly paid a lot of cash-in-hand”.