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Mr. Timms: Clause 26 allows the commissioners to request a payment from a person where they think that that might be necessary to protect the Revenue. The provision is common to other taxes and duties under the care and management of Customs and Excise. The commissioners have the power to decide how much and in what manner such a security must be paid, and may apply penalties in the event that a requirement to provide security has not been complied with.
The security can take the form of a bank guarantee, a bond or indeed a cash deposit. It is a sensible precaution. We need the power to be able to protect the Revenue. We do not intend routinely to ask for security. The powers will be used by Customs only where they are necessary, and where there is a chance that levy that has been collected from customers will not be accounted for.
There is the availability of the commissioners' review and the independent appeal procedures, provided for in clauses 40 and 41. Any appeal against requirement, or the amount of security can be heard without payment or deposit of the disputed amount of security, so the usual safeguards are all in place. These arrangements appear elsewhere in the tax system. I hope that the Committee will not find difficulty with them.
Mr. Ottaway: Paragraph 10 of schedule 5 would impose a swingeing level of penalty interest at some 10 percentage points above the rate applicable under the Finance Act 1996 which, I imagine, is the base rate or something similar to it.
The situation is exacerbated by paragraph 10(5), which cuts out a number of the mitigating factors that might have been taken into account in terms of a failure to pay the levy. The swingeing rate is imposed when there seem to be perfectly good reasons for not paying the levy, such
Mr. Timms: The schedule contains provisions for the recovery of debts, assessments and interest as a necessary part of the arrangements. It provides that the commissioners may, in certain circumstances, make an assessment of the amount of levy due and, having so notified the person concerned, recover the amount as a debt due to the Crown.
The schedule details the circumstances in which an assessment may be made and specifies other conditions concerning the operation of assessments, including time limits within which an assessment may be made. The power to make an assessment of levy due within the boundaries established by law is an important element of an effective control regime for any tax. It is entirely sensible that, where necessary--for example, because a registered person has failed to make any returns as required by law and thus has not paid the levy due--there should be a means by which Customs can act to recover the levy. The schedule provides an effective and reasonable means for Customs to use its best judgment to collect levy which is due but has not been declared, and it is an essential control measure to deter abuse.
Clause 27 and schedule 5 provide for penalty interest to be imposed in certain circumstances; for example, some failures to pay the levy by the due date. Again, this is a conventional arrangement. Penalty interest is compound interest, calculated--as the hon. Member for Croydon, South (Mr. Ottaway) says--at the penalty rate of 10 percentage points above the ordinary rate. Generally, penalty interest is imposed on outstanding debts and is at a higher rate because it represents ordinary interest plus a penalty.
Again, I underline the fact that all these provisions are already in force in other regimes and, to my knowledge, are not causing any difficulties within them. I do not think that there are any exceptional circumstances here which mean that different arrangements should apply.
In all these matters, taxpayers have the right of appeal to an independent tribunal following a review by the commissioners. That is set out in clause 40. The interest is calculated daily but is added to the principal once a month. The rate of 10 percentage points to which I have referred is calculated on the rate for ordinary interest that is applicable under section 197 of the Finance Act 1996. This is a conventional arrangement and I hope that the Committee will find no difficulty with it.
Mr. Timms: The schedule covers procedures for evasion, misdeclaration and neglect, and specifies several offences and the related penalties. It deals, therefore, with the criminal offences and the sentences regime for the aggregates levy. Breaches of most of the requirements stemming from the law or regulations are covered by a civil penalty regime, but criminal sanctions are still needed for serious cases of fraudulent evasion of the levy and other serious offences. Effective punishment must be available for those who break the law or who seek to evade payment of the levy.
The schedule also provides for a civil penalty for fraudulent evasion of the levy. As is common practice in other tax areas, it allows Customs and Excise the discretion to deal under the civil penalty regime with an offence that would otherwise require prosecution as a criminal offence. That point may be of some reassurance to the hon. Member for Croydon, South (Mr. Ottaway). The provision is an incentive for the taxpayer to co-operate with Customs and Excise once the fraud has been discovered and also prevents needless expense being incurred by prosecuting offences involving small amounts through the criminal courts. That allows some flexibility, which I hope that the hon. Gentleman will welcome.
I did not entirely follow the difficulty that the hon. Gentleman has with paragraph 3(1), because it is a straightforward statement that breaches of the provisions set out earlier in the schedule constitute an offence.
Mr. Ottaway: The Minister is going right to the point. The words are "must have": no evidence needs to be produced. There need only be suspicion, and in my judgment that is not good enough, when there are such heavy fines or a seven-year prison sentence.
Mr. Timms: I do not think that that is what is envisaged. The normal arrangements for evidence and court process will of course apply. I see no particular cause for alarm. If I am missing something, the hon. Gentleman might drop me a line and I will be happy to pursue the matter further. Again, I think that this is an entirely conventional arrangement.
Question proposed, That the clause stand part of the Bill.
The mechanism in the clause is probably the right mechanism for solving part of the problem that we will debate later in relation to pre-cast concrete. I see no reason why exports, and import substitution, which we will come to later, cannot be subject to exactly the same regime, regardless of whether we are dealing with raw aggregates or the fabricated material. I hope that, when we come to that debate, we can look back at this clause and see an exact parallel that will enable us to resolve the problem of pre-cast concrete and safeguard the jobs that are at stake. I will not dwell on the subject now, as we will have plenty of opportunity to debate it later, but I wanted to ensure that we have a hook on which to hang those remarks.