Most consumers would happily pay in cash to get a discount, even if they knew it would encourage criminal tax evasion, research by shows.

Among the 87% happy to pay in cash for this purpose, around a quarter said they would use it as an opportunity to haggle for an even larger reduction (see the Income Tax guide).

This comes at a time when the new Government faces a huge job to cut the £156 billion budget deficit. Earlier this week, the coalition announced £6.2 billion of cuts to public spending.

The question asked was: "What would you do if a builder / masseuse / cleaner / plumber / market stall holder or anyone else offered you a 15% discount because 'it's better in my pocket than in the taxman's'?"

Of the 11,285 who responded...

  • 65% would take the discount
  • 22% would haggle and ask for a bigger discount
  • 10% would refuse it
  • 3% would report it as tax fraud

Martin Lewis, creator, says: "Mention the black economy and people think of countries like Greece or the developing world.

"Yet this is proof illicit transactions probably worth billions happen in the UK too. This is a real challenge for the new Government's austerity drive.

"While increasing tax take is important, most don't see putting some cash in a back pocket as too bad, so a crackdown is likely to be highly unpopular.

"Even amongst the small number who'd refuse to take part in the transaction, some commented it was because they'd explicitly been told it was for tax evasion, and had it been left unsaid it wouldn't have been a problem.

"It's interesting to note, as a society, there seems to be an acceptable historic tradition of paying someone 'tax-free' while coming down hard on those who play with the benefits system. Actually, they're two sides of the same coin."

Further reading / Key links

Taxing times: Income Tax guide