Examination of Witnesses (Questions 260-273)
RT HON
DAWN PRIMAROLO
MP, MR MIKE
HANSON AND
MISS SARAH
WALKER
26 OCTOBER 2005
Q260 Peter Viggers: There are a couple
of questions about revaluation for council tax purposes in England.
The Government decided to carry out council tax revaluation in
England and then decided not to. Meanwhile the Valuation Office
Agency, one of your executive agencies, spent £55 to £60
million and trained and recruited about 1,760 staff. Was all of
the £55 to £60 million wasted and what will happen to
the 1,760 staff?
Dawn Primarolo: In terms of the
investments, from the £60 million figure I think that you
mentioned, £45 million will be potential use in the future
in terms of information that has been collected and where we are
across a whole range of things, so that data stays. In terms of
the 1,400 Valuation Office staff, the VOA immediately lost 200
who were on short-term contracts or who were agency staff. It
has now commenced formal procedures with regard to the terminating
of contracts and also there has to be further discussion about
what happens next in terms of the total number of staff in the
Valuation Office Agency that were attached to this. I do not have
at this point, Mr Viggers, all the details exactly because there
are still some decisions to be taken. I am happy to ensure that
the Committee—and it may be a number of weeks yet before
the final decisions are taken—is given a clear answer about
what would actually happen over what time period and the numbers
involved. I am sure you can understand that this is still the
subject of discussions and negotiations.
Q261 Peter Viggers: Quite an expensive
démarche unless you would like to support it further?
Dawn Primarolo: I will certainly
make sure that you have the note with regard to Valuation Office
staff and what happens next.[8]
Q262 Chairman: You are the Minister responsible
for that?
Dawn Primarolo: I am indeed, yes.
I am just saying there are certain decisions that need to be made
before the full answer can be given and they have not been made
yet.
Q263 Jim Cousins: You are the Minister
for tax avoidance.
Dawn Primarolo: Well, no, I do
not avoid it myself!
Q264 Jim Cousins: Of course not.
Dawn Primarolo: And I do my best
to try and assist others not to as well.
Q265 Jim Cousins: We admire your
efforts with regard to tax avoidance. That is the kind of admiration
that is better expressed publicly than privately.
Dawn Primarolo: It has been a
long afternoon, Mr Cousins, I am sorry, I missed that.
Q266 Jim Cousins: But a substantial
number of disclosures of potentially tax avoiding schemes are
now being made under the new provisions which were made in the
Budget. Can you tell us whether any major new tax loopholes have
been identified? As a result, what do you think the additional
tax revenue generated is likely to be?
Dawn Primarolo: The protected
tax revenue that the Revenue will get, or we will not have lost,
is £1.5 billion. The total disclosures across the whole area
are just over 1,600. The way the Department proceeds on these
is firstly those that require immediate action are legislated
for, and you may recall that there was a series of measures in
the Finance Bill which we completed before the summer recess and
that tomorrow afternoon on the floor of the House there is a National
Insurance Bill which is also linked in terms of a scheme that
was avoiding national insurance. So the Department takes it forward
either on challenging that the schemes are even legal through
the normal assessment enquiries and the challenge that the current
law prohibits them, or they take it forward in terms of having
identified what is commonly called a loophole and closing it.
The National Insurance Bill tomorrow is an example of that. I
think it is £250 million on national insurance that we are
seeking to protect.
Q267 Jim Cousins: £250 million
on national insurance and of course the Bill is in front of the
House, but what about direct tax and VAT?
Dawn Primarolo: That is the total
of £1.5 billion.
Q268 Jim Cousins: What measures to
address the avoidance of VAT and direct tax that have been demonstrated
by these disclosures are going to be considered?
Dawn Primarolo: The ones that
have already been submitted have been considered and, as I have
said, they have either been legislated for in the Finance Bill
which we have just had or they are being pursued through the normal
process of revenue assessment and then challenged as to whether
the schemes work at all, and therefore there is another dispute
with the taxpayer. Obviously the speed with which the disclosures
come in, and as HMRC consider legislation is necessary, they would
pass the reports to myself as Minister and I would take the decision
on whether we immediately act on them in the normal way, which
is to make an announcement of an effective date and then legislate
in the next available Finance Bill. The most recent example is
tomorrow's National Insurance Bill.
Q269 Susan Kramer: Just a quickie
on the National Insurance Bill. You are obviously going after
the most sophisticated, creative financial minds in their own
pocket so how confident are you that the National Insurance Bill
will, if enacted, be effective in shutting down these sophisticated,
complex tax avoidance schemes and if it is enacted how will you
evaluate that success?
Dawn Primarolo: In terms of this
particular challenge, which is basically City bonuses, successive
governments have tried to deal with them, and I know, Ms Kramer,
you were on the Finance Bill when we had this discussion because
the tax part of it was in the Finance Bill. The problem with these
highly sophisticated schemes is that they require highly sophisticated
legislation to prevent them and they only target that particular
area and then the planners move on somewhere else and then everybody
complains that the Finance Bills are getting too large and there
is too much administration. So I have tried a slightly different
approach this time which was my statement last December at PBR
to say that any attempt to avoid national insurance and tax on
bonuses, however they try and do it in the future—and we
closed down the schemes we knew about at the time of which this
is the last bit—and we will close it and we will do it effective
as from 2 December last year. This is a very specific attempt
to concentrate people's minds. The challenge as ever is you close
the loophole and they move somewhere else, and then Parliament
and tax officials and tax specialists and accountants do not like
the complexity of the administration, which I have the greatest
sympathy for as the Minister who had to take it through Parliament.
It is a specific instance in a specific area and whether it works
is whether we get the money in or whether we do not lose the money.
Q270 Susan Kramer: Do you have a
benchmark you have set yourself to bring it in?
Dawn Primarolo: That is where
the £250 million comes in and it was within the documentation
that was announced at the Budget. Again, I do not have the exact
reference but I am happy to let you have that.
Chairman: Mr Love, a last question?
Q271 Mr Love: I just wanted to ask
a very general question. You have told us about the benchmarks
and the rationale for the Bill that is coming forward tomorrow
and the savings you hope to make in national insurance, but do
you have an overall tax avoidance target similar to the 1% that
the National Audit Office expect you to live within as far as
the tax credits system is concerned?
Dawn Primarolo: Yes we have and
it is published as "assessments of the tax gaps", as
it is politely called, in a number of areas. Those have been in
previous documentations and the PBR will update the Department's
performance against increasing revenue take and preventing loss
of revenue in those areas. On the direct tax side, it is a much
more complex issue in terms of actually identifying a specific
number. It is because there are varying methodologies, and there
is not one methodology for achieving what the figure is. We could
invest a great deal of time in trying to do that but I have directed
the energies of the Department to pursue the tax lost rather than
consider how they might define it as a total figure. There is
various speculation out there but on the direct tax side I am
not able to specifically put a figure on it and until some methodology
does emerge that is agreed as reliable we will continue to be
unable to do that.
Q272 Mr Love: Perhaps you could measure
it against the level of complaints that come in against the tax
system?
Dawn Primarolo: People only complain
about us requiring them to pay, not how many public services they
get for what they do pay.
Q273 Chairman: Minister, thank you
very much. We look forward to receiving those few notes and then
to see you probably early in the New Year as our inquiry unfolds.
Thank you very much indeed.
Dawn Primarolo: Thank you very
much.
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