Commissioners for Revenue and Customs Bill

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Mr. Laws: I am grateful to the Paymaster General for giving way. We are dealing with a serious point, and to put it on the record, would she explain what the reasons are for keeping the administration of tax credits in the department for the foreseeable future rather than allowing them to be dealt with by the Department for Work and Pensions?

Dawn Primarolo: I shall look up the references in the O'Donnell review and give them to the hon. Gentleman during the next sitting so that he can re-read the published review of why tax credits are dealt with by the Revenue and why it is Government policy that they should remain there.

I do not think that it is appropriate—you may possibly stop me, Sir John—to rehearse the policy and political reasons for the existence of tax credits: the importance of their being within the tax system, the removal of the stigma, the encouragement to work and the contributions to child care and to children as part of an anti-poverty strategy, which is central to the functions that the Treasury has outlined and that the new department will continue to administer. I know that the hon. Gentleman has a different policy review in mind but that is not a subject with which I feel I should engage more directly today. I would just say to him that one should be careful about what one reads in newspapers.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5

Officers' initial functions

Mr. Tyrie: I beg to move amendment No. 78, in clause 5, page 3, line 16, at end add—

    '(4) Insofar as an officer of Revenue and Customs is exercising a function which relates to Value Added Tax, subsection (1) shall not apply.'.

I may, as I mentioned earlier, and with your permission, Sir John, refer in passing to one or two other clauses; of course I should not reiterate those points on stand part. The clauses in question are of course closely interlinked. They are outwardly mild-looking clauses, dealing with Customs and Revenue powers. My amendment is, as I am sure the Minister knows, a probing amendment. I shall not press it to a vote. I want to test the Minister's commitment to a thoroughgoing review of the new HMRC body's powers.

It is important to have the current position clear in one's mind. Clauses 5 and 6, taken together, limit the extent of the new HMRC officials' powers over revenue matters. The provisions are intended to prevent revenue matters from being made subject to excessive powers such as those that the Customs can at present exercise. For example, the extensive Customs powers to collect VAT, by which its officers can turn up with a warrant, raid a place and smash down the door to get a document, would not be available for a standard income tax assessment. It is important that we maintain that distinction.

That discrepancy in powers can be illustrated in many ways. It is worth comparing for a moment section 20 of the Taxes Management Act 1970—which enables the Inland Revenue to go to commissioners for a warrant to obtain a document—with what Customs does, which is to exercise a much more draconian power on the back of a police-style search-warrant. Clauses 5 and 6 reflect the concerns that have been expressed by many that the Revenue should not have those much more heavy-handed Customs powers—the Treasury Committee report and the written evidence that was given to the Committee provide elaboration on that topic.

In quite a clever way—I commend the drafting—clause 6(4) provides that former Inland Revenue matters cannot be dealt with under Customs powers; at least, that is what I take that subsection to mean. My amendment investigates what happens if things are the other way round. What about circumstances—and this is just possible—in which the Revenue may have more powers than the Customs? What restriction is there on Customs using Revenue powers? Are we sure whether we have that stable door bolted before the Bill is passed? Why is there no parallel restriction on Customs officers using Revenue powers?

The amendment that I have tabled is intended to provide assurance of that kind only with respect to VAT. I could have drafted it more widely, but I think that it serves its purpose in making the points that I want to make. I should be grateful for an explicit assurance, if this is the view being taken, that Customs already has all the powers enjoyed by the Inland
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Revenue. Even with that reassurance, we should be left with a very uneven distribution of powers within the new body, HMRC. That is inevitable, stemming from the different cultures of the two bodies. We have discussed that many times: Customs has a quasi-policing inheritance—the cutlasses on the wall have been mentioned in the House—whereas the Inland Revenue has a gentler established approach to getting the money in from, as I think I put it on the Floor the House recently, reluctant but largely honest taxpayers.

10 am

My second question is: what plans do the Government have to harmonise that discrepancy? I gather that the Government are considering a consultation document that may come out in the next few weeks. I should be grateful if the Minister would say more about that. As part of that process, are the Government going to commit to a full consultation—that is, one in which ample opportunity is given to all parties to offer their views?

If the Government are committed to a full and meaningful consultation, is there not a case for a more thoroughgoing review of the whole issue? You probably remember well, Sir John, the Keith Committee review of 20 years ago—I am not alluding to your age, but to your political experience. Some 20 years ago Lord Keith looked into the issue and came up with a number of balanced and interesting recommendations. He did a good job, as everyone agreed. For example, he decriminalised many VAT offences. I believe that those who sent in late VAT returns prior to Keith thereby became criminals. That was a crazy situation and there needed to be an adjustment, so such acts were made civil offences. The world has moved on a lot in the 20 years since Keith and we could probably do with another thoroughgoing review.

Let me give four reasons for that change. The first is the electronic revolution. When tax authorities have to consult eBay to collect revenue, that reflects a new reality in the tax collection world. The second reason why we may need to consider a review is the emergence of Europe in tax matters and the intrusion of the European Court of Justice in our affairs. Whatever the Government's formal position on Europe not having any influence on tax, the truth is that it does—do not worry, Sir John; I will not elaborate on that issue, but Europe is a factor.

Thirdly, there is increasing oversight of customs practices by the European Court of Human Rights. The Court has recently reviewed the Hansard procedure, whereby those who own up will be all right. However, some people have found themselves being Hansarded several times over, which is what happened to Lester Piggott and Ken Dodd. I think that Piggott was Hansarded three times, after which the decision to prosecute was taken. The Hansard procedure has been given a brush-up in the light of the ECHR review, but that brush-up was an ad hoc, piecemeal improvement. I suggest that a more thoroughgoing review might be necessary. The fourth reason is that recent massive Finance Acts have moved us into another physical dimension, owing to the sheer volume of legislation.
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The size of those Acts probably justifies looking at the extent to which, bit by bit, they may have altered the relevant powers.

My final question is: will the Minister agree to a full, Keith-style review? Will she set out the principles that would lie behind any change in, or harmonisation of the powers that she might consider? I could do that for her now—clearly, one would allow a department to take a power only if it was deemed necessary, if its application was not onerous for taxpayers and if it was subject to appropriate checks and balances. I would be interested to hear the Minister's view on that.

I have a fifth question: what is the Minister's time scale for harmonisation, bearing in mind that any changes will be in primary legislation and there will be quite a lot of that to amend? The existing powers are, I believe, in the Taxes Management Act 1970, the Customs and Excise Management Act 1979, and the Value Added Tax Act 1983. There is of course also some landfill tax and environmental legislation.

In looking at this area, we are dealing with something that is of great concern to the outside community. I have some advice here from the Institute of Chartered Accountants of Scotland, which has picked up on a point in a draft Government document on the review of powers. The Government statement said that

    ''any officer of HMRC, whether formerly an officer of Customs and Excise or of the Revenue, can use those powers that exist in relation to the specific tax they are looking into. If an officer of HMRC obtains information that is also relevant to other areas of HMRC they may pass on that information for immediate and future follow-up action.''

The great concern of ICAS is that this statement may lead to the transfer of powers resulting in an extension by stealth to the powers that each department currently possesses. In other words, an officer could say, ''While you are in there, would you take a look to see if you can find X or Y?'' We would then find that these powers are being used in much more extensive ways than were ever initially intended. We do need reassurance on that issue. A thoroughgoing review, such as I am calling for, is probably the best way to provide that reassurance and I hope the Minister can help on that point.

Mr. Laws: Briefly, I want to agree with many of the general points about powers that the hon. Member for Chichester has raised under amendment No. 78 to clause 5. I really have only two brief points to add. The first concerns the serious point about the consultation document which came up as a reference on Second Reading. We need to have as much information as possible about when that will emerge, and whether it will be before the end of Committee hearings. Secondly, on a more detailed point, I want to ask the Paymaster General for clarification on clause 5(2) and the definitions under paragraphs (d), (e), (f) and (g). May we have clarification of the precise distinction between paragraphs (d) and (e), and (f) and (g) in subsection (2), and whether it would be possible to consolidate these definitions in some way, so as to reduce the burden of things? Surely it is not necessary to list all of these particular roles in this way?
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