Examination of Witness (Questions 308
WEDNESDAY 22 MAY 2002
308. Minister, may I welcome you and apologise
on behalf of the Committee for keeping you waiting. We had a meeting
of the main Committee and I am sorry you were delayed. It would
be helpful if you would identify your two colleagues.
(Dawn Primarolo) Please do not apologise.
I know there was a vote and that you had very pressing business
this afternoon so there was a slight delay. May I introduce Stephen
Banyard who is the Director of Local Services and Sue Pither who
is Assistant to the Director?
309. We are coming to the end of an inquiry
into self-assessment in which we have received a great deal of
evidence and been exploring. A number of those submissions do
refer to the difficulty and the complexity in understanding self-assessment.
Mr Banyard himself, when he gave evidence, actually said to us
that there was that particular difficulty. Would you accept that
you have a duty to the taxpayers to make it as simple as possible?
(Dawn Primarolo) Yes, I would entirely accept that
proposition. Self-assessment as a whole is working very well,
but the questions of who is in the self-assessment system, with
particular focus on pensioners, and the information and support
which we provide to taxpayers to make that process where they
are in self-assessment as easy as possible is an obligation on
the Government and the Inland Revenue which I do accept and we
need to make some progress on.
310. If it is an obligation and you simply need
to make progress, are you doing enough to simplify the system?
Mr Banyard told us there was no deadline, no formal report for
the work which is ongoing on simplification. You presumably receive
(Dawn Primarolo) This is referring to the review which
I have asked for. Clearly the priority on the introduction of
self-assessment was to get the system in and working. Through
that period, where possible, we have tried by alteration to the
system to reduce the complexity and ease the position for taxpayers.
The review is not time limited in the sense that it cannot make
proposals on what should be done until the end of the period.
I expect to receive reports as the review progresses on how changes
can be made and to bring those changes in when I can and as soon
as I can. Although the review started in February of this year,
it is difficult to describe it as a review. Whilst it has an urgency
about it now, picking up the point you made about the obligation
to the taxpayer, it should be a function which runs forward constantly
as we assess how the system operates, the changes we can learn
from that operation and from others' experience and how we can
improve that. To start with, I have asked the review to focus
particularly on the issue of making the return shorter and precisely
the type of information we now need and whether we can reduce
the number of pages. That is the first priority. The second priority
is to look at this difficult question of whether we really need
as many people within self-assessment as we currently have. I
know that the Committee is very interested in pensioners but there
are other issues which we need to look at and whether we really
need these people in the self-assessment system or whether we
can remove them completely and allow them to be within the general
system. That is the priority for the work now. Then it will need
to move on to other areas which evidence to your Committee has
identified that we need to address. I should be more than happy
to keep the Committee fully involved in every sense in assisting
through this process. There do not have to be any questions of
secrecy here; this has to be about improving the functioning of
the system. I am already very grateful for the work which organisations
like TaxAid, the Low Income Tax Reform Group, the Working Together
Group and the professional organisations are offering to the Revenue
and how we can share that information.
311. I am sure my colleagues will pick up on
your hint about scope and pensioners. When Mr Gibbs came here
to give evidence on the Budget he said that in the Budget itself
there were no measures on self-assessment simplification. Why
(Dawn Primarolo) There were several changes in the
Budget which assisted taxpayers in their returns, particularly
the self-employed and in the area of company taxation. I would
freely admit to the Committee that it is proving very difficult,
for instance in the priority of wanting to remove taxpayers wherever
possible from the obligation of self-assessment, to settle on
a clear system which does not end up making it more complicated
for them. I would share the views of the Committee that I would
have hoped to have been further on, but we are not and we need
to press forward as quickly as we can. I am more than happy if
the Committee wish, for instance, to provide, perhaps on the return
from the recess, a meeting early in October to give you a progress
report on some of the projects we are working on now which we
would hope to bring forward to give you an involvement and an
idea on how we are trying to take it forward.
312. That would be very helpful. The Chartered
Institute of Taxation submitted to you a series of what they called
Quick Wins on tax simplification. Mr Gibbs again told us in the
Budget hearings, "I have to say that none of the specific
proposals we have had have been terribly useful".
(Dawn Primarolo) As a Treasury Minister there are
many people who offer us advice and advance solutions which at
different times we are not always able to proceed with. What I
want to establish is a working relationship with all of these
organisations where the priorities of Government can be understood
alongside the priorities of these organisations and how we work
through those to deliver the objective of simplification where
that is possible and ensuring that the taxpayer gets the very
best service. There is always a balance here in terms of fairness
and certainty. Sometimes producing simplification in one area
of tax can produce complications in another. If we are to promise
people that it is to be easier for them, we need to make sure
that an unforeseen problem does not arise somewhere else. That
is really where we are now. What I should like, but I realise
that it is very important not to raise expectations here, is some
Quick Wins to put on the table frankly, to show a definite indication
of the commitment that I am trying to stress here. For instance,
making the return shorter would be a huge indication, a huge step
forward, whilst making sure that we are fair to all taxpayers
in how we proceed on that basis.
313. The self-assessment form does not carry
with it an explanation as to why it has been sent to an individual
taxpayer. When Mr Banyard was before us he said that he did not
think there was any scope to provide that explanation because
it was too complicated.
Is that fair?
(Dawn Primarolo) Wherever possible we
should make every effort to explain to the taxpayer how the rules
operate. As far as I am concerned, there can be no holds barred
in ensuring that we try to move to transparency in providing the
information but in a way which is usable. Information can be provided
but if the way the information is provided is totally incomprehensible,
it does not really take us any further forward. I think that the
issue is how to take what are sometimes complicated explanations
and convey them in a way which is accurate but does not transfer
that complication to the taxpayer.
314. Will you be able to help a pensioner who
for a year or two receives the form, then the following year does
not and yet sees all the commercials on the TV saying you must
get your form in by so and so otherwise you are fined and gets
into a panic about it? Can you do something with your transparency
reforms which will help someone in that situation?
(Dawn Primarolo) Yes, we have to do this. The complication
is that we can and do provide access for enquiries. Many pensioners
who are not even in the self-assessment system ask why they have
not had a self-assessment return and it is very difficult to allay
their fears. We can offer visits, we can make sure they get rapid
response from the Department. Your point really goes to the heart
of the matter, particularly with regard to pensioners, which is
how we ensure that that anxiety does not develop in the first
place. That is about whether they should be in the system in the
first place. I am very conscious that with nine million people
within the self-assessment system currently we really have to
try very hard to focus on how we can remove them from the system
entirely so that we do not get this concern because they had the
tax return last year but not this year. It is reaching that point
in a system which only became active in 1997 and was a huge change.
Now it is bedded in, we really needand that is what I want
the review to go on to doto ask ourselves what information
we really need and what information we are collecting which we
do not need to ask for. That is the sort of process we have to
315. There is that, but there is also the people
moving in and out of the system. There are issues about what the
system is like once you are in it; then there are also issues
as to whether you are in it or not. There is a certain movement
of people in and out of the system over time. What is the difficulty
of simply having a statement incorporated on the form which says
"You may come in and out of this system depending on various
circumstances" so at least people know that their relationship
to the system can change over time.
(Dawn Primarolo) What is very important is that where
somebody has been in the system and they are out of the system,
we should be absolutely clear at that point with themand
we do not always manage thatthat they will not get the
form again and they should not get it and if by error they do,
then there is a procedure they can follow and just ignore it.
Pensioners particularly, although maybe other taxpayers as well,
are not very comfortable with the idea of ignoring something which
comes from the Inland Revenue and therefore the obligation is
all the greater on us. One of the issues I found with designing
forms is how much information is on the form and therefore lengthens
the form, but if we cross-reference it to guidance notes, people
find it difficult when they get to a question which says "See
Guidance Note 11". One of the tests I triedI know
this is not terribly scientificwas to sit down and fill
in the form myself and find how far through the form I could get
before I was stopped in my tracks and needed to go away and get
some other information or needed to refer to the guidance notes.
There is a balance here. If we want to keep the form very short,
which is certainly one of the points which has been made to us
strongly, how much of the information on the form is really relevant.
In explaining what might happen next, the priority has to be to
say we should tell people that they cannot and should not get
the form again and we have to sharpen up on that. We have then,
in how the system operates, to be clearer with people when we
are telling them that they are coming into the system. The obligation
is on us rather than trying to guess. This is obviously a big
programme. What I have said to the Revenue is first get everybody
out of the system who does not need to be there. At the same time
we can focus in on what information we need to provide in support
for those who are still within self-assessment. I have to say
it sounds much easier when I say it than it is in practice, but
that clearly is the right thing to do and clearly has to be the
dynamic. Delivering it is not quite that easy.
316. When you go through that process of weeding
the people out of the system who should not be in it, there is
no reason why you should not, once having identified them, write
to them and say thanks for the forms you have completed, we shall
not be sending you any more. That is possible, is it not?
(Dawn Primarolo) Absolutely; yes, as a minimum. Yes,
I absolutely agree.
317. I was pleased to hear in part of your answer
that you are already looking at reducing the size of the form
and impressed that you tried to fill one in. I employ an accountant
myself. Most of us, as well as the eminent organisations who have
given evidence to you, are taking our evidence from our constituents
and they do not all have the benefit of an accountant and find
some of these forms extremely difficult to complete. Have you
looked at the experience of the Department for Work and Pensions
and their work on reducing the benefit claim form from 40 pages
to just 10? As you are looking at reduction, have you looked at
other Departments and what they have done?
(Dawn Primarolo) Yes, we have. I hesitate to say how
many pages might be relevant on a self-assessment form so I will
just speculate here on a target and perhaps the Committee will
accept it as that. If we could get the form down to four pages,
we should be doing extremely well. If we get it down to fewer,
that would be brilliant. The other thing about the people within
self-assessment is that something like 50 per cent of them do
not need an accountant. We see that in terms of the returns we
get before the September deadline. It is a question of how we
approach this problem and it is quite right, as has been identified
both in evidence to you and what Members of Parliament themselves
have said in Debates on the Floor of the House, that the first
obligation is to make sure that we do not have people in the system
whom we really do not need. The next step is to make sure that
the system is transparent, that forms are reasonable, and that
there are different ways in which to the convenience of the taxpayer,
the taxpayers who are in the self-assessment system can then deal
with us. That is the sort of process we need to go through because
for some people I should quite like to know why we cannot code
more people out of the system basically. When the design was made
of self-assessment the decision was taken that all high rate taxpayers
would be within the system? Do we absolutely need to say all higher
rate taxpayers are within the self-assessment system. These are
the sort of fundamental questions we now have to ask because that
would influence how form design, information, support systems
would then dovetail in behind that. We have to look at lots of
different ways of designing the forms once we are clearand
that has to be the prioritywho is in the system.
318. Am I to infer from that answer that one
of the problems in form design is the breadth of population the
form is currently aimed at if we are to get accurate and complete
information from a wide group of people in different circumstances?
(Dawn Primarolo) Certainly if you look at the form
in many places it says "Ignore this page" and it is
quite difficult. The point is that just receiving the form is
daunting for some people. Yes, we have to tailor what we do to
the specific groups we have within self-assessment and then what
we have to do, as our experience is building up we are becoming
more proficient at this, is to test the forms properly before
we bring them into the system. We have gradually improved our
expertise and ability to do that by model offices or using taxpayers
who are prepared to volunteer to be involved in pilots which get
the form design right by them filling it in and saying there was
not enough information about whether that was relevant information.
One of the things we find is that they give us a lot of information
we might not need, but they give us everything because they are
not clear about the form. That sometimes makes the logging of
the information very difficult because we are doing it electronically,
taking the forms through and the system will not do that. Yes,
we have to do all the things you say.
319. It sounds as though there is a prospect
of self-assessment defeating its own objective if we are not careful.
Is there a balance to be struck between use of Revenue staff time
in having to answer questions about how to complete the self-assessment
form and if we shorten the form and perhaps lose some clarity,
may there be further dialogue because of the lack of information
coming from the individual taxpayer?
(Dawn Primarolo) That is exactly the balance to be
struck. It would be counter-productive not to have enough information
and to have to go back to the taxpayer. In a sense, much like
our own tax forms as Members of Parliament, there can be a standard
simple form for the majority in the system whose tax returns are
straightforward, but there will be those taxpayers whose affairs
are more complicated and therefore they still may require additional
sheets to explain the information, collect the information which
is relevant to them. What is necessary is that we understand better.
Instead of sending everything to every taxpayer, we can send relevant
information gathering to the taxpayers we need to.
1 Note by witness: At the earlier hearing Mr
Banyard said that the Inland Revenue was looking at how to give
people a clearer idea of whether or not they were in Self-Assessment. Back
Note by witness: The legal position is that a taxpayer
who is issued with a Return must complete it and send it back.
But where a Return is issued in error the taxpayer should contact
the revenue and discuss the position. Back