A restuarateur has claimed VAT tax avoidance is “endemic” in Brighton and Hove.

Andy Laurillard, who founded Thai restaurant chain Giggling Squid in Hove, said honest businesses were being undercut by the tax dodgers.

Some restaurants do not even have tills, so cash payments are not being automatically registered, he claimed. He called for cash payments to be phased out to wipe out “cheating” and suggested VAT inspectors did “little homework” on the issue.

He said: “The playing field needs to be levelled by proper control. The VAT guys come down like a ton of bricks on people that are honest and disclose the liability but get into occasional difficulties on timely payment.

“But they don’t do any of the hard work sniffing out the massive fraud. I know restaurants in Brighton that don’t even have tills.

“33% of everything we take from customers goes to the taxman – VAT, payroll taxes, Corporation Tax and business rates.

“Unscrupulous operators can put cash straight into their pockets with no realistic chance of discovery, as HMRC is not sufficiently resourced or organised to clampdown.

“I would like cash to be gradually phased out – a radical idea to level the playing field, reduce tax collection costs and wipe out all manner of cheating and thieving.”

Malcom Harvey, of the Federation of Small Businesses, said: “If this is going on, it’s mortifying.”

But he thought the bigger problem came from large-scale legal tax avoidance.

“It often feels like the tax authorities go after small businesses, but not the likes of Starbucks. It’s the bigger ones who work out ways to not pay tax.”

Gavin Stewart, Brighton Business Improvement District (BID) Manager, said more and more businesses were going cashless: “We are making it as easy as possible for our businesses to use Chip and PIN and have negotiated some of the cheapest deals which means that it only costs them 12p per debit card transaction.

“By making this type of payment system both accessible and affordable for small businesses we are removing some of the barriers and helping them become more sustainable.”

An HM Revenue & Customs (HMRC) spokesperson said: “The vast majority of businesses pay the tax they owe. We clamp down on the minority who bend or break the rules.”