Examination of Witnesses (Questions 280
- 298)
WEDNESDAY 13 FEBRUARY 2002
MR ROBIN
MARTIN, MR
KEITH MOORE
AND MS
NAOMI FERGUSON
Mr Robinson
280. Mr Martin has referred to a specific case
that is identifiable. The ones that Mr Moore referred to in the
late 1980s were anonymous. Was that about a specific case or anonymous
just to warn an investigator from a location?
(Mr Moore) I mentioned the context was at the same
time there was an explosion at Londonderry Tax Office. It was
also at that time that the Terrorist Finance Unit was being set
up and we tied those three incidents together. The reason for
the anonymous threats we thought was to discourage the involvement
of the Inland Revenue in the Terrorist Finance Unit because the
threats were addressed to a named individual and there was press
speculation at the time that the Inland Revenue would be providing
information to the Terrorist Finance Unit.
281. Have you ever had to back off a case because
you felt that it was putting your personnel in too much danger?
(Mr Moore) I am not aware that we have backed away
from any specific case on the grounds of danger alone. Clearly
that is one factor in the consideration of cases as a whole, of
registration, but we prefer to deal with that by managing the
risk rather than simply walking from the case.
282. Are there any no-go areas in Northern Ireland
for your investigators?
(Mr Moore) There may be areas where they would not
personally go on advice of the security forces but that is different
from saying there are areas we do not investigate.
283. It seems to me, having studied the behaviour
of paramilitary organisations over a long period of time, generally
when somebody is beginning to hurt them there is a very standard
response from them.
(Mr Moore) Yes.
284. Is it that the Inland Revenue is not an
effective mechanism for dealing with the funding of terrorist
organisations, maybe we should be concentrating more elsewhere?
Is the fact that you have not been hit too much by them an indicator
that you must not be hurting them too much?
(Mr Moore) I am not sure that the Northern Ireland
region would say they have not been hurt with the number of buildings
that they have lost.
285. That is because it is part of the British
state.
(Mr Moore) I appreciate that. * * * They are much
more difficult to work. There is a minimum level of co-operation
in contrast to what we normally find in Northern Ireland and elsewhere
in the UK. Invariably we do not get to speak to the taxpayer,
everything is done through intermediaries. As I say, that is not
unique to those cases, it happens with individuals in the UK more
widely without criminal links. Some people are simply more co-operative
than others. It is typical of those types of cases that there
is, as I say, a minimum level of co-operation. * * * I think that
suggests that we are pushing cases now when we come across them
in exactly the same way as we would push others. We have no mechanism,
as I think has become clear, for searching out cases with paramilitary
links but where we come across them we do not shy away from them
either.
(Mr Martin) If I can just add, Mr Robinson, there
was some mention of smuggling earlier in the hearing. We have
taken on—I think passed on from Customs to us—in the
recent past four substantial cases where smuggling was involved
and we are pursuing those. One of them I think has been settled
and the other three are working, is that right?
(Ms Ferguson) Yes.
(Mr Martin) I would not say that we are holding back
and I hope we have not given you that impression.
286. Have there been any occasions when the
police have asked you to take a step back because you are interfering
in their operations?
(Mr Moore) Not that I am aware of, no.
(Ms Ferguson) Equally not that I am aware of, no,
in a local context.
Mr Barnes
287. In terms of being perceived as an arm of
the British state, have you had in the past a series of attacks
on Inland Revenue buildings or a series of threats which involve
people having to get out? I seem to remember an early meeting
I had in the past when we were just getting off the ground with
Families Against Intimidation And Terror and they were telling
us that in the Inland Revenue it was a regular case there was
a worker who was in an invalid chair who had to be carried down
the last flights of stairs on a regular basis. Were those types
of things happening and have they stopped?
(Ms Ferguson) Yes. We have had eight offices blown
up over the course of the past 30 years, the last one was in 1992.
I think it is fair to say that in common with other organisations
in recent years the threats have diminished considerably. There
would have been a period in time when there were regular alerts
and our staff would have taken every precaution should any incident
have occurred.
288. When you were giving advice and training
to investigators either in Northern Ireland or visiting Northern
Ireland, is it that you have been giving advice in these two areas:
general advice about safety of the activity itself and then there
is particular advice which is needed in terms of certain investigations
that they engage in because they might trip wires in connection
with paramilitary activity?
(Ms Ferguson) Certainly we give our staff advice on
their own personal safety in terms of handling any type of inquiry
or visit. If they are going out of the office, ensuring that somebody
knows where they are, carrying mobile phones etc these days to
minimise any risk to an individual, whether that is from a paramilitary
organisation or any other risk. We do make sure that all of our
staff are aware of the risk to their personal safety and do what
they can to minimise it. If they are at all uncomfortable with
anything they discuss that with their manager and escalate it
as appropriate. In terms of whether or not we give them any specific
training to deal with potential cases involving paramilitaries,
I would say no. Clearly anybody who works in Northern Ireland
or has grown up in Northern Ireland or has anything to do with
it does look differently on perhaps a bag left in the front reception
of the tax office than you would in Lincolnshire and our staff
would act accordingly. I think it is around a general awareness
of the situation in Northern Ireland.
289. Do you feel there might be a need for extra
forms of awareness and protection being extended with the development
of the Proceeds of Crime Bill and Anti-Terrorist legislation generally
which might more clearly get you into these areas as a regular
part of your activity?
(Ms Ferguson) I think it is something certainly that
we will have to look at. As Keith mentioned, the last threats
which were made against staff which we are aware of happened at
the same time that there was press speculation around the setting
up of the Anti-Racketeering Unit and potential Revenue involvement
in that. Clearly as we implement the new legislation we will want
to keep our security awareness and procedures under review.
290. It is interesting that it is a while since
there were significant threats and activities against investigators
as distinct from offices taking place. I was wondering why you
felt that was because despite the fact that certain forms of paramilitary
activity have ceased, money and its circulation and its recycling
and use from paramilitary sources has by no means ceased. Is it
just that the reaction by anybody who can get hold of money from
those sources may differ from circumstances in the past?
(Ms Ferguson) I think it is purely that and the general
climate in Northern Ireland has changed. I am certainly aware
that whilst we do not keep statistics in such a form that will
allow me to say X per cent of cases involved some form of illegal
activity, if you speak to some of my investigators they will tell
you that they have and are currently investigating individuals
who would appear to have funds that must have come from a source
outside the normal course of trade. As Keith mentioned, if that
source cannot be shown to be non taxable we will assume that they
are profits from the trade. Accountants and individuals in Northern
Ireland are aware of that and that is how they operate. I think
in terms of the threat, it is a matter of the changing climate
within Northern Ireland and the general decrease in the level
of such activity.
291. In response to Mr Bailey you pointed out
that you did not have separate statistical information which could
say this was paramilitary money that was involved in the case
as distinct from other areas. One potential comparative exercise
would be if there is more fraud of this type that has been unearthed
by the Northern Ireland region per element of the gross domestic
product there than there is within any other region. Do you know
if that is so or if that is something that we could discover because
if there was an extra amount per element then that would need
explanation and that explanation could be paramilitary funding
although we would have to look more deeply.
(Ms Ferguson) Certainly in terms of the amount of
investigation yield brought in within the local operations in
Northern Ireland, and I will leave Keith to talk about special
compliance operations, we are usually at least on average, if
not better than average, against the rest of the UK. We are certainly
not bottom of the list this year. Our yield to date is something
like £18 million from compliance investigations. On a cost
yield basis in terms of the amount of resource input in order
to achieve that figure we would be comparatively better off than
a lot of the rest of the UK. Whether or not you could tie that
down to saying that was due to paramilitary activities or other
economic factors, I have no research or information to be able
to say that.
292. It would not even work as a beginning of
a question if you were not significantly at the top, and that
is not the case.
(Ms Ferguson) We are quite high up the list. I would
have to check exactly where but on a cost yield ratio we will
be significantly better than a lot of the other regions.
293. It would be useful information.
(Ms Ferguson) I can get that for you certainly[1].
Mr Clarke
294. Changing the subject and moving on to the
familiar ground of calculation. A pre-warning: it is going to
be a how long is a piece of string question, I am afraid. In respect
of investigations, cases undertaken by the office, could you give
us an average time that the investigation will take place from
start to finish? Before you answer with the answer "it depends
on the case", could you answer in a way that suggests the
normal amount of time for a very short investigation, the minimum,
and the maximum for a very long investigation and whether or not
there is an average. Could you also phrase your answer within
terms of not only time but the number of officers that may be
involved and whether or not they would be involved on a full or
a part-time basis.
(Mr Moore) The Special Compliance Office deals with
three different types of case which are relevant to your desire
to split up the different types into simple, short, long and resources.
We deal with evasion, which is serious fraud but dealt with by
negotiated settlements with a view to a financial penalty, we
deal with criminal investigations and we deal with avoidance.
In terms of the serious fraud negotiated settlement type of case,
that type of case is normally dealt with by an individual investigator
who will carry a portfolio of such cases, typically 15 to 20,
maybe as low as ten depending on the complexity of the cases,
and would be a mix of Northern Ireland and mainland cases. The
simplest of those cases could be resolved in, say, 18 months,
somewhere between 12 to 18 months. A more typical type of case
with a certain measure of complexity to it would be around about
the two year mark. On the avoidance side, those types of cases
tend to be slightly longer running because they can involve very
large sums and they can involve very detailed consideration of
technical aspects of tax legislation. Some of those cases may
actually need to go to the civil courts for determination and
maybe even to the House of Lords for a final determination. That
does not happen in many cases but some of those cases can take
eight to ten years to resolve, so they affect the average. Again,
a typical case would be resolved in around about two years, I
would say. Overall our elapsed time on civil work and non-criminal
work averages somewhere between two and three years. Over the
last two or three years we have been trying to reduce the proportion
of cases which take over three years to settle and we have been
successful in doing that. The average is probably now down to
nearer two years. I could not get that information for you in
time for today's meeting, we might be able to do it with some
research if it was necessary to do that[2].
Criminal investigations by their very nature can take a lot longer
than the straight forward negotiated settlement but within 12
months of beginning the investigation we would hope to complete
the investigation and then we are in the hands of the courts for
concluding the prosecution. It would be unusual for a prosecution
case to be resolved through the courts within two years of beginning
the investigation.
295. Thank you for that. First of all, additional
information you can provide will always be helpful. The reason
for the question is if we look post Assets Recovery Agency there
is a high possibility that your staff will be working within the
Agency and you have already said that you have different types
of officers chasing different types of cases. Does that mean to
say that those working with the Assets Recovery Agency will have
to be multi-skilled? You have talked about settlements of 12 to
18 months and for criminal activity 12 months. Would it be that
type of officer you would see working within such an Agency rather
than on evasion?
(Mr Moore) I have said we do three different types
of work. The same investigator cannot do those three types of
work at the same time but they could move from one to the other
because the skills set is the same, other than the criminal investigation
training which is required and we regularly have people moving
from civil work to criminal work. As far as the skills for the
Assets Recovery Agency, my own view is that it is not necessarily
Special Compliance Office staff who would do that because people
stay in the compliance office for only a part of their career,
typically five to seven years, and then return to other parts
of the department. People going into the Assets Recovery Agency
could come from anywhere within the Inland Revenue.
Mr Bellingham
296. How many staff would you expect the Assets
Recovery Agency to need to complete the Government's estimated
workload in the first year?
(Mr Martin) In the Assets Recovery Agency?
297. That is right, in the ARA.
(Mr Martin) Perhaps I could say that the staffing
of the Agency is really a matter for the Home Office and for the
Director of the Agency as it is set up. We have been given the
impression that in its initial stages the Agency might be looking
towards having 50 staff and then maybe building up to perhaps
100, 150 staff. I am sorry, I am not speaking with authority on
that because in the end this is something for the Home Office
and for the Agency's Director. We have been given the impression
that it is something of that order.
298. What role would the Revenue expect or wish
to play within the Agency?
(Mr Martin) I think the Revenue would like to play
as positive a role as we can consistent with maintaining the integrity
of our own operation. We are in discussions with the people who
are concerned with setting up the Agency. We do not yet know how
many of our staff they would like us to second to the Agency but
that is something that we will be discussing with them as things
develop. We also very much hope to be able to help them with things
like training. I guess there are a number of ways in which we
can assist with the setting up of the Agency.
Chairman: Thank you very much all of you for
coming and for sharing with us the facts that you have told us
about. If we were persistent it was not meant to be criticism,
it was meant to be trying to find out what we can do maybe to
make recommendations to help increase the chances of spotting
terrorists getting the money that they do. That is something which
we are already coming to the conclusion takes multi-agency working.
I am very pleased to hear altogether what you were saying that
you are able now, thanks to the legislation, to co-operate much
better because I am aware of the areas in which you have been
constrained in the past. I hope that this will in particular usher
in a new era of co-operation between you and parts of the Police
Service in Northern Ireland because it seems to me to be a very
important way of getting at terrorists. If they cannot finance
their operations they cannot operate. Thank you very much indeed
for coming.
1 See supplementary memorandum from the Inland Revenue,
page 52. Back
2
The average length of investigation time taken on Special Compliance
Office cases for tax avoidance is 2.98 years and for tax evasion
cases 3.33 years. These figures are based on cases which were
concluded in the year ending 31 March 2001 and exclude criminal
investigations. Back
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