Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 280 - 298)



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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