Examination of Witnesses (Questions 80-99)
Wednesday 31 March 2004
Mr Mike Eland, Mr Mike Wells, and Mr Richard Summersgill
Q80 Mr Jenkins: If you could do one of
these a week, roughly a two year case, I am talking about £7
million. You could collect in £7 million off small traders
whereas, when you take your large case to court and we know that
there is an estimate that maybe they defrauded VAT of £30
million, you bring back moneys and some of your cases show that
you bring back in very small amounts because the individual does
not have the assets anymore.
Mr Eland: We are seeking to tackle
all of those levels. As I said, we would not use a trained criminal
investigator to look at some of these cases. We would use a VAT
assurance officer and VAT assurance officers are bringing in about
£3 billion a year there.
Q81 Mr Jenkins: Do you think it is justifiable
that you have actually done a value for money exercise by ensuring
that you are going to get more money out of the serious crime
activities by diverting resources away from this type of activity,
the small trader?
Mr Eland: We have to cover all
of those different elements. We are obviously trying to optimise
the use of resource across those areas and we do look at things
like the rate of return that we are getting.
Q82 Mr Jenkins: So, the answer is "yes"?
Mr Eland: We do use cost benefit
analysis in how we allocate our resource.
Mr Summersgill: These two cases
are specifically done by our shadow economy teams which are looking
for those 125,000 to 180,000 people who are trading above the
threshold but are not registered. We have about 200 staff years
going into that sort of activity which is routinely capturing
about 4% or 5% of those people. One can argue either way how much
resource you should put into that but I think that is about the
right balance.
Q83 Mr Jenkins: All I wanted to know
was that you had done the evaluation, you had done the analysis
and you decided it was best and good value for money to put the
resources out of what is an easy roll-out plan
Mr Eland: Yes.
Q84 Mr Jenkins: I have a belief that
you would be far, far better off if you were paid by the results.
I think if you were just told to go out there and collect it in
you would collect it in and I think this would drop dramatically.
That is what Mr Steinberg was referring to in the allocation of
resources point, where you felt the allocation of resources was
disproportionate to the cost overall and now you have assured
me you are doing the figures.
Mr Eland: Yes, we are.
Q85 Mr Jenkins: You got an extra 1,000
staff over the last three years.
Mr Eland: Yes, that is right.
Q86 Mr Jenkins: What return do you expect
from the extra 1,000 staff?
Mr Eland: The target which has
been set is two billion.
Q87 Mr Jenkins: Two billion? Will they
achieve it?
Mr Eland: We hope so, yes.
Q88 Mr Jenkins: Are they on a bonus scheme?
Mr Eland: Not related to that
amount of money.
Q89 Mr Jenkins: Should they be? Should
they have an incentive?
Mr Eland: We do not have direct
linkages to the amount of money brought in but we are clearly
evaluating the performance of our staff in meeting these overall
targets. If they do perform well than there are rewards within
our pay system, yes.
Q90 Mr Jenkins: When they brought 69
cases successfully to court do you think they would get a bonus
on that?
Mr Eland: I think you have to
look at the quality of the cases as well as the quantity, some
of them are extremely complex. As you will see from the case studies
for some of them the trial takes six months, this is not just
small-fry cases here, we are trying to tackle it is some of the
higher end of the fraud market.
Q91 Mr Jenkins: We know there are very
complicated and difficult cases, do you feel you have the right
team in place? Do you think you have the right skills in place
so that we know as we are going on that each step is being investigated
so that the lawyers can tell you, "yes, we have a chance
of being successful in this prosecution, this is what we need
before we get the case in to court?"
Mr Eland: Yes, we do have some
very skilled investigators working in this area.
Q92 Mr Jenkins: I understand there is
a point in the Report which says you do lack lawyers in the team.
Mr Eland: Is this the reference
in the Butterfield Inquiry?
Q93 Mr Jenkins: Yes.
Mr Eland: We have a prosecuting
group of lawyers who advise during the case and are responsible
for taking it to court but we should add to that and expand the
number of lawyers who are actually working as part of the investigation
team. We have accepted their recommendation and we are implementing
it, so we are putting it in place.
Q94 Mr Jenkins: The skill level of the
team is critical, is it not?
Mr Eland: Yes.
Q95 Mr Jenkins: These teams are specialist
teams?
Mr Eland: They are specialist
teams and as you will also see from the Butterfield Report we
have accepted the recommendation there that although he was satisfied
with our initial training of investigators he felt there needed
to be additional refresher training, and we are also introducing
that as well.
Q96 Mr Jenkins: When a case comes to
court the word goes out, when you catch a small trader the word
goes out and it reduces the amount of fraud in the system and
traders are going to come on board. When you have caught somebody
how much publicity do you give it in the local press?
Mr Eland: We are increasingly
seeking to use this as a means of deterring people and to get
as much publicity as we can when we do that. Part of this recent
exercise we have been doing in terms of focusing on the shadow
economy is we are concentrating that regionally as well as by
trader type so that we can actually increase the impact it has
through the local press in that region.
Q97 Mr Jenkins: Now you are going to
be working even closer to the Inland Revenue so you can attack
these people as a team, a concerted effort goes into it, are you
going to start flagging up, are you are going to go in there and
target them and hopefully bring people on board before they come
under your microscope?
Mr Eland: Yes, we do want to do
that sort of thing. We accept that we can do more in the press
and publicity area. We do also need the co-operation of the press
but certainly the local press are usually willing to do that.
Q98 Mr Jenkins: What incentives are you
offering traders to come on board?
Mr Eland: We had an incentive
scheme where we said to them that if they came forward in a particular
period although we would expect them to pay back tax we would
wave the penalties that we would apply and that would then be
followed by a period of cracking down.
Q99 Mr Jenkins: Using the carrot and
stick approach, if you felt as a trader you were defrauding the
VAT of £100,000 and if you got caught all you have to do
is pay £100,000 plus a fine of £25,000 do you think
it is worth the gamble?
Mr Eland: No, I do not think it
would be quite as straightforward as that. First of all it would
be a question of if we are talking about £100,000 whether
we would impose the 20% or a higher figure—we have dealt
with that, I think. Secondly, you are then getting that on your
VAT record now and that will mean we will be paying much closer
attention to you in the future.
Mr Jenkins: Would it be worth the gamble?
There are thousands and thousands of people in this country driving
round without car tax because they know it is worth the gamble,
without insurance because they know it is worth the gamble, and
I suggest they do not pay VAT because they know it is worth the
gamble.
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