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Strategist Matt Turner’s solution for tax avoidance

In an attempt to highlight the issue of tax avoidance, the Shadow Chancellor Ed Balls highlighted the lengths he goes to when managing his expenditure. Speaking on Sunday’s Andrew Marr show, he claimed how he asks for receipts for even the smallest of cash transactions – from haircuts to hedge trimming.

“People should ask for a record of paying somebody, even if it was for small jobs like cutting a hedge, because they have a ‘legal obligation’ to pay tax,” he said.

Balls’ claim was quickly rebuked by the Government, with Iain Duncan Smith suggesting that he was out of touch with the electorate as it was unfeasible to expect people to collect cash receipts for everything. And in his defence I wouldn’t be able to remember a time when I have asked my barber for a receipt – like most people – enforcing tax regulations isn’t something I consider in my day to day.

However, in 2012 it was estimated that £35 billion is lost to the nation’s coffers due to cash in hand payments, so it’s not a small issue to ignore. However because customers are unlikely to begin gathering receipts for every purchase, better alternatives to cash should be promoted. Where an alternative that is easier to use and allows clearer auditing of low-value transactions can be employed – everyone wins.

This is where marketing (rather than stringent regulation) can help promote a more transparent way of making low-value transactions. Contactless payment systems like PayPal Here or Square have been readily available for small businesses for a while now. Using a simple adaptor (often free) these devices allow anyone to turn their smart phone, tablet or computer into mobile POS device.

However, despite contactless payments being on the rise in the UK – with Visa reporting that contactless use grows by 22% every quarter – the technology is still facing an image and accessibility problem. People are worried about the security of using these cards. This doubt makes it difficult for small businesses to invest in new technology if there is not a clear demand for it from their customer base.

So how do we solve this problem?

I suggest that resources could be better spent communicating the benefits of contactless technology, to break the barriers to adoption. Promoting contactless and digital payments as the modern, morally acceptable way to pay for goods and services, can help reduce the volumes of cash payments. It also supports Britain as a more modern, digitally-minded country for the future.

To support this suggestion it is worth noting the success of The Small Business Saturday programme by American Express. This annual campaign has helped improve adoption of American Express by encouraging the use of American Express cards in small stores – using the increased demand as a justification for the higher fees per transaction.

The public shouldn’t feel compelled to do the job of HMRC when getting a haircut – however through communication there is an opportunity to promote an easier, more acceptable and all around better alternative to keeping every small receipt.

To read the full account of Shadow Chancellor Ed Balls speech – check it out here.