Examination of Witnesses (Questions 80
- 99)
WEDNESDAY 29 APRIL 1998
MRS V STRACHAN,
CB, MR R ALLEN
and MR J MORTIMER.
80. Suppose our chancer does not pay.
(Mrs Strachan) Precisely. Many of our chancers
do not pay.
81. You have to take them back to court,
do you not?
(Mrs Strachan) You either have to take them back
to court or you have to write it off, which is why the Financial
Secretary said that from now on we would not be going down the
civil penalty route, we would be doing more prosecuting.
82. I am very glad to hear it. I am not
trying to be unpleasant but I would thoroughly recommend the idea
of taking away driving licences and using some imaginative approaches
to hitting these kinds of people where it would hurt. I am glad
to hear you are considering that because that will have a considerable
impact. I hope you will have a budget for marketing the likely
consequences of dealing because that is much more likely in my
view to put people off, the chancers, the lower level, the middle
ranking people. What are you doing to tackle the higher level
of this range of criminal, the ones who get their two or three
Transit vans and go three times a week and are actually making
considerable profit?
(Mrs Strachan) The ones who are doing that would
be investigated by our investigation service, which has been doing
a lot of work against excise fraud of various kinds over the last
couple of years.
83. Would they always be prosecuted when
caught?
(Mrs Strachan) If the case is sufficiently serious
yes, we would take them to court.
84. How do you judge sufficiency in terms
of seriousness?
(Mrs Strachan) The premeditation, the sophistication
of the organisation.
85. What about likely profits they would
make, the volume for example?
(Mrs Strachan) Indeed. One of the weapons which
is available to us is confiscation of assets. That is quite a
strong push in the direction of prosecution and seeking to restrain
and then have assets confiscated if the fraudster is convicted.
86. That would take even longer in court,
would it not, applying for orders like that?
(Mrs Strachan) I have to say there are no quick
and easy solutions. If there were a quick one we would have done
it.
87. May I move on to the question of fines
and penalties and paragraph 54? It seemed to me that there were
perhaps some lessons to be learned in respect of dealing with
that and other evasions and frauds, about what is effective and
what is not, that may be able to be applied in respect of excise
fraud too. You mentioned that you had a rather good response to
the introduction of surcharge in that you had suddenly a much
higher compliance rate. Is there any way in which you can apply
that kind of thinking to excise smuggling?
(Mrs Strachan) There are two quite different categories
of people we are dealing with here. With VAT these are penalties
which are applied to established registered businesses. We know,
give or take missing traders and totally bogus businesses, who
they are, we know where they are. These are regulatory offences
like failure to submit returns on time, failure to pay, failure
to register and so forth. With excise people one is dealing with
people who are not on our books. You actually have to find them,
watch them and watch them through a sufficient period to be able
to establish the scale and the scope of the fraud. It is not easy
to read across. What we are doing is looking at all of our penalty
regimes in so far as they apply to established businesses, that
includes excise businesses, to see whether we can get a rather
more coherent set of penalties than the ones we have.
88. May I move on to something else completely,
the landfill tax and what kind of impact that might be having
in respect of the dumping of rather unpleasant chemicals and unpleasant
things which we do not really want in the environment? Do you
think that there has been any impact from introducing the tax
which obviously is a disincentive to dodgy characters to landfill?
If you can go and dump it somewhere else instead you will because
it is more costly because of the tax to landfill. Do you get any
feedback which indicates to you that on the margins companies,
dodgy or otherwise, are choosing to dump instead of dispose of
their waste properly as a result of this?
(Mrs Strachan) The tax applies to registered site
operators. It does not of itself apply to the kind of cowboy fly-tippers
and so forth.
89. Some of the sites themselves, to be
honest, are a bit dodgy. I am not pointing any specific fingers
but environmentalists may say to you that they can point to operators
of landfill sites where they are not too happy about the way in
which they deal with waste.
(Mrs Strachan) We did do a review of the landfill
tax, the outcome of which was announced on budget day. That indicated
that almost one third of companies had begun or were considering
waste recycling, reuse or minimisation. Indeed recycling and reuse
of construction waste is at an all-time high. We have not really
seen much hard evidence of increased fly-tipping but the environmental
agency and the Tidy Britain group I understand are carrying out
more research into what is happening at the dodgier end of the
market.
90. Paragraph 19 says you had fewer registrations
than you expected initially when the tax was brought in from sites
and companies operating sites. The report blames that upon out
of date information from the licensing authorities. Did you not
find it surprising the licensing authorities did not seem to appear
to have up to date information about who was conducting this kind
of business within their area? Are you sure that is the explanation?
(Mrs Strachan) It is very difficult for me sitting
here to be sure that is the explanation but we did go to all the
sites we had expected to register and what we found was that some
had actually ceased trading, some had been taken over by other
registerable operators and some of them were licensed but only
to store and treat waste not to dispose of waste. Those were the
sorts of reasons why sites which we had expected to find registerable
were not. That is not attributable to some terrible failing on
the part of the environmental licensing authorities, it is just
that things have moved on.
91. Have you now conducted, carried out
and completed, that set of visits to all these sites?
(Mrs Strachan) During 1997-98 we did not visit
the 100 per cent we had hoped to do but we did visit over 90 per
cent and we reckon that covered 98 per cent of the tax and we
are now catching up with the rest.
92. In respect of fraud and evasion one
of the other things you may get when a new tax is introduced is
people avoid it or say they are dumping something which they are
not dumping which is not subject to it. You have an assurance
programme. Are you confident that is producing accurate figures
in terms of what sort of evasion is going on?
(Mrs Strachan) In that year we made 550 assessments
for a total of about £2 million. We have found one definite
fraud case which we are currently pursuing and another case which
may be a fraud, which we will obviously investigate thoroughly
and take if it is a fraud.
93. Just to jump back to the question of
smuggling and your new more innovative approach to it, using intelligence,
targeting, looking at risk, do you ever use agents provocateurs?
(Mrs Strachan) What kind of smuggling are we talking
about?
94. Excise smuggling.
(Mrs Strachan) We do not use agents provocateurs
in any circumstances. In some circumstances we do use undercover
officers who may infiltrate an organisation in order to establish
what is going on and enable us to get the evidence we need. So
far as the kind of excise smuggling we are talking about is concerned,
the cross-Channel stuff, that probably would not be the way we
would use our resources.
95. What about drug smuggling?
(Mrs Strachan) Yes; yes, we will use undercover
officers.
96. Are you confident that your officers
do not approach legitimate business people and draw them into
existing scams? How do you check on that? How do you make sure
that innocent people are not dragged into sometimes quite serious
cases?
(Mrs Strachan) From time to time allegations get
made that that has happened. I am not aware of any allegations
having been established as true that that has happened. We do
have very tight controls over the way we use undercover officers.
When they go undercover they are very carefully managed and have
to report very regularly to the National Investigation Service
which manages them about precisely what they are doing and why
they are doing it and how they are doing it. It is not our business
to lure innocent people into wrongdoing. It is our business to
find out people who are doing wrong and try to bring them to justice.
Mr Davidson
97. May I start with paragraph 33-i? It
says here, "For about a fifth of the cases sampled no funds
had been or were expected to be recovered ... significant problems
in enforcement ... money being laundered overseas". Can you
tell us which countries in particular were involved in this alleged
laundering and with whom we had difficulties?
(Mrs Strachan) I do not know exactly which cases
the NAO sampled. Where money is laundered overseas the first problem
is to find out where and how and that is difficult. This is a
time consuming job. I did explain to your predecessors when they
were looking at the question of drug smugglers' assets how we
tackled it and how resource intensive it was actually to pursue
these. Generally speaking overseas authorities are perfectly cooperative
but there are one or two countries which have very strong banking
secrecy laws and where we cannot get at all the information we
want.
98. That is what I am pursuing. If it is
being laundered overseas presumably it has gone beyond just overseas
somewhere. You know where it has gone overseas and then you have
the difficulty tracking it. What I am trying to clarify is in
which countries you had difficulty identifying where it was, what
accounts it was in and how it was disposed of once it had reached
there. Presumably we have no difficulty in tracking things with
our European allies or are they part of the problem as well?
(Mrs Strachan) Almost all of our European partners
are extremely cooperative. Luxembourg has quite strong banking
secrecy rules.
99. I do not want to go round the world
one at a time. Could you just tell me the countries you have had
difficulties with?
(Mrs Strachan) Luxembourg and Switzerland are
the ones which come to mind which have very strong banking secrecy
rules. For the rest the problem is not cooperation of the authorities,
the problem is just that it is a very long drawn out difficult
process simply to establish the facts and then go through the
processes to get the assets restrained.
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