Examination of Witnesses (Questions 480-492)
JOHN HEALEY
MP AND
MR PAUL
GERRARD
2 FEBRUARY 2005
Q480 Mr Cousins: Just to pursue the example
of the small provincial airport that you referred to earlier—
John Healey: The small, well-run
provincial airport!
Q481 Mr Cousins: Yes, let's not argue
about definitions. Let's accept the view of Customs centrally
that there are these "provinces" that we have in Britain.
Obviously we do not know whether there are going to be any prosecutions.
You have mentioned a figure of two million cigarettes being seized
so presumably that would occur in your financial figures. Would
you count that as a disruption of a gang? Would that appear in
your gang disruption?
Mr Gerrard: No, I would not have
thought so.
Q482 Mr Cousins: No, it would not. Do
you not think that a European Union-wide—because this particular
flight came from the European Union origin location—agreed
system of what was reasonable for people to carry for personal
use would be of advantage because then you could get operations
at both ends of the line?
John Healey: There are established
indicative guidelines in Europe for that. They cover the amount
of cigarettes, hand-rolling tobacco and alcohol that as a guidance
is the starting point for judgments about whether or not excise
goods are for personal use. As it happens, we in the UK have guideline
limits which are more generous since October 2002 than the European
standards. We have introduced those because it helped us and has
proved to help us make a clearer distinction between those people
who are genuinely shopping and those who are trying to smuggle
goods in not for their own personal use but for re-sale.
Q483 Mr Cousins: But the effect of that
is that you cannot get a system of controls at each end, at origin
and destination. That is the practical effect.
John Healey: Are you, Mr Cousins,
suggesting that what should be introduced are not guideline levels
but import limits?
Q484 Mr Cousins: Possibly within a narrow
band. However, this is not something the British Government is
pressing for and our limits are higher than most European Union
countries?
John Healey: We are not pressing
for that. I suspect it would contravene some of the fundamental
rules of the Single Market. Even if that concern could be settled,
the introduction of such limits rather than guideline levels would
need to be agreed right across the European Union.
Q485 Mr Cousins: Could you let the Committee
know the indicative levels for guidance being applied in the various
countries of the European Union. You have already indicated that
our levels are higher and it would be interesting perhaps for
us to see how much higher.
Mr Gerrard: I can tell you now
if you want or I can write to you. It is not a problem. The Europe
indicative limit for cigarettes is 800, ours is 3,200; for hand-rolling
tobacco it is one kilogram and ours is three kilograms; and on
alcohol we operate precisely the same minimum indicative levels
as other European countries. [6]
Mr Cousins: Thank you.
Chairman: To wrap up we have got
two more areas of questioning, Angela Eagle's question on oils
and then Norman Lamb on VAT.
Q486 Angela Eagle: How much of the oils
fraud that you have identified actually involves misuse of red
diesel?
Mr Gerrard: Our assessment is
that the vast majority of the illegal fuel market in Great Britain
is as a result of frauds involving red diesel and kerosene. Because
it is an illicit market I cannot give you precise proportions,
but the vast majority of that is as a result of red diesel or
kerosene fraud.
Q487 Angela Eagle: I know you have narrowed
it but have you looked, Minister, at just getting rid of the difference
in duty and if needs be compensating farmers in a different way?
John Healey: We keep all that
area of—
Q488 Angela Eagle: —it seems the
most obvious.
John Healey: —of rebate
rate and impact on smuggling under review. Just to be clear, the
situation in Northern Ireland is different. In Northern Ireland
there is both a significant cross-border shopped element of the
non-UK duty paid and there is also because of the long land border
a significant smuggled element which is not, frankly, part of
the problem we face in the rest of the United Kingdom.
Mr Gerrard: One other thought
on that which is that the Australians got rid of their marked
fuel about three or four years ago and brought in a reclaim system.
What they found is that that does not get rid of the fraud, it
just changes the fraud type. You get multi-million dollar reclaim
frauds rather than what we have now marked fuel misuse. It does
not necessarily get rid of the fraud; it just changes the mode.
Q489 Norman Lamb: Mr Healey, could I
just ask you while you are here about the important issue that
has been raised by the Forum of Private Business about this practice
of stores such as Tesco's and possibly Specsavers as well setting
up operations in Jersey and selling to the domestic market in
the UK DVDs, CDs and so on and managing to avoid payment of VAT
and thereby managing to sell a CD for £8.90 or something,
completely undercutting traders within this country. Do you first
of all agree that that is unfair competition essentially and that
it is something that has got to be addressed and attempts should
be made to close down what likes like a loophole?
John Healey: Certainly it is the
case that some countries are using what is in this country an
£18 threshold for imports of goods from outside the European
Union which if they are below that value do not attract VAT or
customs duty. Now it is the case that some businesses are arguing
that this is an avoidance, it is not illegal but it is an avoidance
and it undercuts their ability to compete effectively in the UK
market. It is also the case that this is at present leading to
a not insignificant revenue loss of about £80 million a year.
Q490 Norman Lamb: I was going to ask.
It is an £80 million loss of revenue to the Exchequer?
John Healey: £80 million
at present.
Norman Lamb: But growing? Is the trend
going up?
Q491 Chairman: Could we let the Minister
answer because he is in the middle of an answer.
John Healey: As things stand at
the moment, that is set to grow over the next few years to a couple
of hundred million but on the other side we also see arguments
from consumer groups that would like us not to reduce the threshold,
as some businesses argue, but to increase it because of the benefits
that would bring to the consumer. These are matters that, as you
would expect, like other tax issues, we keep very carefully under
review.
Q492 Chairman: We have to leave that
there now. You have promised us a number of notes. Obviously we
are coming to the end of this inquiry on excise duty and it would
be extremely helpful if we could have those even more promptly
than usual. We want to report in time for the Budget, unless of
course you can tell us when the Budget is?
John Healey: I will undertake
to let you have the further information very rapidly.
Chairman: Thank you very much.
6 European legislation specifies that the 90 litre
level for wine should include no more than 60 litres of sparkling
wine. UK regulations do not distinguish between still and sparkling
wine but simply state that the indicative level for wine is 90
litres. Back
| 
