Examination of Witness (Questions 360
WEDNESDAY 22 MAY 2002
360. That is the tax year just gone.
(Mr Banyard) Yes.
361. What was it the year before roughly?
(Mr Banyard) Slightly worse.
362. And the year before that?
(Mr Banyard) Was slightly better.
363. I appreciate that you do not have the numbers
but it would be quite helpful if you could give us definitive
numbers for each of the years from 1996 so we can establish a
profile. What is your expectationand this will only be
an estimate obviouslyof the percentage you will not get
in the tax year we are in now, and the year after that and the
year after that? Do you do estimates and have targets for how
you want to raise your performance?
(Dawn Primarolo) I have to agree that as a target
with Revenue, which we have yet to settle, but I want to see some
improvement on that. I think we have answered this in a PQ in
terms of the performance over the years. As soon as we have settled
the targets I shall be happy to inform the Committee of what we
would like to see in future years and how we have been performing
It has been quite persistent around a small variation and one
of the big challenges is to try to work out why there is this
quite persistent number at the end. Comparing with the old system,
which is not particularly easy to do, the system pre self-assessment,
there were people who were persistent in that system as well.
I am not sure that self-assessment has really cracked that particular
problem, those who are compliant in the system and the amount
of tax coming in, but those who continue to choose not to be compliant
have not been addressed.
364. Just to get a feel for it, have you any
targets in your own mind for the reductions in that figure in
the next three years as a Treasury target or something which might
form the basis of public service agreements?
(Dawn Primarolo) Firstly I have to consider and discuss
with the Revenue the resources which will be available.
365. You do not do it now for three years hence.
(Dawn Primarolo) And then we shall call for year on
year improvements and what we would expect.
366. But would you publish the targets?
(Dawn Primarolo) I believe they are published as part
of the Inland Revenue PSA targets. I shall double check that.
They are published and I shall certainly be happy to let the Committee
367. I only ask you to try to understand whether
or not the penalty regime is adequate at the moment. I think when
Mr Banyard came to see us in March he said, "... this is
an area where we think we can do better", which was honest
and open. In the course of trying to do better, have you looked
at the Irish system of penalties at all? I was one of the four
intrepid members of the Committee who had the privilege of speaking
to the Revenue there and they had quite an interesting system.
Is it something in the course of your work that you have looked
(Dawn Primarolo) Yes, we are looking at the Irish
system. They do not have the intermediate deadline which we do,
where people can get the information to us by a certain date and
we calculate it. Their initial attempts are much lower than ours:
75 per cent as opposed to our 90-whatever per cent. I understand
that they resort to sending out a solicitor's letter as a reminder.
Of course in understanding the differences, and particularly bearing
in mind your visit and therefore that we should ensure that we
have covered these issues, yes, in looking at the system and seeing
where there are lessons to be learned they are not exactly comparable
systems. I know that you have a lot of experience professionally
on this. How tough penalties should be is a vexed question. I
try to get the right balance but it is incredibly difficult when
we are now trying to address those who persistently want to.
368. On that point I have one specific question.
I stress for anyone listening that I am not advocating this. In
Ireland, which in very many ways is comparable to our own political
system, it is a western, liberal, democratic, industrialised state,
it is a member of the European Union, they actually has a system
of naming and shaming. I think we were told that it is in the
region of just over
12,000 in unpaid tax liability and after going through
all the hoops and warnings and determinations you could end up
named in a local newspaper, even a national newspaper. I just
wondered, in the course of running an efficient tax system and
I think we have heard a lot of empirical evidence that you as
a Minister and your officials really do think through how the
systems can be improved and all the evidence supports that you
really are monitoring the operation of the British tax system
closely, have you ever thought of that one? Have you considered
(Dawn Primarolo) I have to say that I thought it was
interesting. Like you, I am not advocating it for a minute. I
am a little bit worried and I wonder on closer inspection whether
the Irish system could become a bit of a badge of honour. The
other thing is that when we prosecute people they get named, but
we also take a lighter touch approach on the basis that some people
make genuine errors, nonetheless they are in the penalty system.
I was intrigued with this proposition that we might name and shame.
I am not attracted to it, but the principle of putting pressure
on is something that we can look at. It would probably be a bit
expensive on advertising as well.
369. That has not bothered your Government before
now, has it?
(Dawn Primarolo) Touché.
370. There were differing views as to the efficacy
of this system, the badge of honour point was also raised. I only
mention it. If this were a system in Pinochet's Chile we would
say of course it is ridiculous and we would never touch it. The
fact that the Irish Government has operated it for in excess of
20 years or in that region made me just wonder whether it was
something you were looking at. I stress that you do look at these
issues and your officials are trying hard to look at new things
and innovative things. Is this something you are looking at?
(Dawn Primarolo) Certainly you could not look at the
Irish system without looking at the issue of naming and shaming,
but I have to say that I am not at all attracted to it because
of naming and shaming incorrectly or the consequences and the
balance with taxpayer confidentiality. We operate in a slightly
different way. It works for the Irish and it might not work for
us. It is an interesting point to look at.
371. Fine. Your officials have not said, "This
would be a brave decision, Minister".
(Dawn Primarolo) No. I do not think they would even
try to do that. I would consider it in the "This would be
a very, very brave and courageous decision, Minister" category.
"You're out of your tiny head" approach.
372. Just going back to filing quickly, the
National Audit Office said that in the case of the on-line filing
four out of five attempts failed in the year 2000 and as many
as three out of ten failed for the most recent tax year. It has
been calculated that at this rate the target of getting 50 per
cent of people submitting their assessment on-line by the year
2005 will be a target which is missed. I do not want to stoop
to the level of the anecdotal, but on 21 May in the Daily Telegraph
a Mr Charles Allis of Cobham Surrey said, "I have an MBA,
designed several accounting systems and I filed US tax returns
for several years, but the Inland Revenue software is simply terrible".
I just wondered what your view was on those assessments, one anecdotal
and one from the NAO, and what strategies you have put in place
to tackle it. We all know that a software needs time to bed down.
We would not expect it to be right in the first year obviously,
but those are actually, even bearing that in mind, quite depressing
(Dawn Primarolo) Ninety per cent filed first time.
There appears to be a lot in January this year and certainly some
people repeatedly failed to file. I could not possibly comment
on the individual case. I would agree with the general thrust
of the point you are making which is that we have to strive constantly
to improve and understand where the difficulties are being experienced
and try to remove them from the system. A high percentage said
in January that 90 per cent managed to file first time8. If I
may, I take a little comfort in that it must be getting better,
I hope, every month in terms of people being able to do that.
There are still some people who are experiencing difficulty.
373. We look forward to your teach-in with interest.
I have certainly signed up already. I can hardly wait.
(Dawn Primarolo) Excellent. Thank you. I look forward
to it. Can I watch?
374. I am interested in the determination procedure.
If I have a stable income for years and years and years and then
suddenly receive £500,000 from some source or other and I
do not fill in a tax return, after a while the Inland Revenue
will determine my tax based on previous returns and will make
a good guess, not allowing for this windfall. Am I then no longer
liable to fill out a return or will you continue to pursue me
for my return even though you have charged me the determination?
(Dawn Primarolo) We shall continue to pursue you for
your return, so do not do it.
375. We have had evidence about enquiries. I
quote Mr Robert Maas, the Chairman of the Technical Committee
of the Institute of Chartered Accountants who said to us "...
there is a growing feeling that they" [the Revenue] "ask
for information for the sake of asking for information, without
any realisation that producing information is often very costly".
Should taxpayers really have the right to know why they have been
selected for an inquiry and what aspect of their return concerns
(Dawn Primarolo) No, I do not think so. How the enquiries
operate is on a profile and risk basis. I am not quite sure that
I would agree with that proposition. It is very difficult to provide
enough information in a system to make it clear as to the obligations
but not provide so much information that you assist those who
are trying not to fulfil their obligations. I still preferred
the route of ensuring that the Revenue is better targeted at the
information that it requires and is asking for information it
requires rather than collecting information that it may not need.
Part of the process of looking at forms, in looking at the taxpayers,
in looking at who is in the system, will help us to develop that
process and therefore develop the guidance we are providing to
taxpayers in explaining how the system works. There is a difficult
balance to strike there which we will do our best to have correct.
It is not always possible to give all the information because
it assists those inadvertently who are determined not to comply
with the system.
376. May I first of all say that we are extremely
grateful for Mr Banyard's supplementary note on this point of
payment methods and payment systems? I am aware of the Newcastle
experiment and its relative success with payment of tax by direct
debit. What I am not clear about is whether it is the intention
to extend this system gradually throughout the country.
(Dawn Primarolo) The Newcastle experiment is quite
small in terms of a pilot. It is providing very useful information
and certainly looking at how that could have wider application
needs to be the next step in our consideration. We need to ensure,
which is not the case at the moment, that people can pay us rapidly
and conveniently in various methods, whether direct debit, over
the internet, with credit cards. There are constraints for us
on that in terms of expense to the Department in running those
systems, particularly with credit cards. Yes, that is certainly
something which I want to see us explore and develop to make it
more convenient for the payments, so the taxpayer who does not
quite get round to doing the payment but has done the return has
a much simpler and quicker way of doing it and therefore does
not find himself with penalties.
377. You have mentioned these various payment
options, credit cards and so on. The take-up of credit cards in
this country is enormous now: 50 million credit cards. It does
seem extraordinary that there is no ability to pay tax using these
methods and that, despite the problems set out in Mr Banyard's
note, there does not seem to be any timescale for their introduction.
(Dawn Primarolo) The problem is that the credit card
route is very expensive in the facilities which we as a Department
have to pay for.
378. Because of the transaction charges.
(Dawn Primarolo) Yes. We need to look very carefully
at whether that extra cost is justified in providing that additional
facility. To go back to the beginning, it is really a question
of what we should do first in working through these improvements
to the system and therefore if there are savings elsewhere whether
or not we can stand the cost. It is a very high cost for us, I
am informed by the Department. It is not ruled out. It is just
a question of what comes first.
379. Your reference to high cost is obviously
related to credit cards and one understands the transaction charges
there, except that if you can pay your television licence by credit
card it does not seem extraordinary that you should be able to
pay tax by credit card. It does seem extraordinary that there
is no timescale for introducing the other payment methods: direct
debit, internet transfers.
(Dawn Primarolo) You can pay into our St Austell office
by your debit card and that is running. It comes back again to
the points which were made earlier on as to whether it is well
enough publicised that people can use it. You can pay on the internet
by debit card, but some people may be reluctant to do that. A
variety of payment methods is already open, but it seems to me
that what we need to do is have a coherent package of credit/debit/internet/over-the-phone
payments and putting those in place is not, for the size of what
we are dealing with, as easy as it might seem on the face of it.
It is a question of where we use our resources first. It is a
question of priorities.
7 See Ev 100. Back
Note by witness: These details have been checked and in
the peak period of January 2002, around 80 per cent of attempts
to file on-line succeeded. Back