Examination of Witnesses (Questions 140-149)|
22 NOVEMBER 2006
Q140 Ms Keeble: At present I understand
that for every £5.43 which is being contributed by the Government
parents are contributing £1. Would you expect to see that
change and the level of parental contribution increase, and what
sort of level of parental contribution would you take to be an
indication that the policy is succeeding in encouraging parents
to save? Have you done any work on that? Would you have views
Mr Gray: I am not sure that we
Mr Jones: That is very hard to
say because, of course, the type of saving for a child that might
be appropriate at particular times in the child's life might be
different. Bear in mind that with the child trust funds the funds
cannot be accessed until age 18. Parents have to decide whether
that is an appropriate vehicle into which to put savings for the
child. Obviously, it is one form of saving which is highly relevant
but it is not the only form.
Q141 Ms Keeble: I wondered if we
could have a note on the different areas of research that you
are doing into how many of the parents who are on the maximum
tax credits and therefore will be getting the enhanced payments
are taking up the funds, and if you have any information at all
as to what is happening with the accounts that you place, and
also what you are looking at doing in terms of encouraging take-up,
which seems to be the most crucial thing, and how you are working
out who needs to be targeted and who is going to do the targeting,
because there is still a very hard core of people who obviously
are not using these and if they are the ones who most need it
then it is particularly important to have effective research to
find out who they are.
Mr Gray: We can certainly send
out all the research we are currently doing and have planned.
It certainly does cover income distribution ranges, to cover your
point on tax credit take-up.
Q142 Jim Cousins: Mr Gray, one of the
Government's great successes has been an increase in the corporation
tax take. I have been studying your accounts, which are quite
helpful in setting this out, that about a third of all the increased
revenue that HMRC raised between the financial year 2004-05 and
2005-06 was accounted for by increases in corporation tax. There
was an increase in tax take of 25% in a single year. That is a
very notable performance. Your predecessor has now done this review
which the Committee has just seen, the review of the links with
large business, because obviously the bulk of the corporation
tax take does come from the large business sector. There are a
variety of measures set out herebusiness forums, more consultation
between business and HMRC, an escalation rule which will mean
decisions get taken very much earlier and very much down the tree
of decision making. What impact do you think this might have on
corporation tax take?
Mr Gray: I do not think we have
done assessments as to whether it has an impact one way or the
other in the aggregate. What we are seeking to do in implementing
that review, as I think I was saying in response to Mr Newmark
earlier, and how I would characterise all those specific measures
you mentioned, is to try and get to a more open, transparent relationship
in our dealings with big business. The intention of that would
be to get to a position in which it is easier and more expeditious
for us to reach agreements with business about the level of tax,
and specifically corporation tax, that they are paying. My aspiration
would be that that creates an environment in which it is easier
for us to collect the right amount of tax and to close any tax
gaps, but to seek to quantify what is the effect in the way I
think you are asking me I would find extremely difficult.
Q143 Jim Cousins: It is very interesting
that you should say that because this review was carried out by
your predecessor as Chairman of Her Majesty's Revenue and Customs,
and one thing that is clearly missing from this review is the
impact on revenues. It is not mentioned in the whole document.
You are really telling the Committee that against this background,
where increases in corporation tax have been of such strategic
significance in sustaining the Government's public expenditure
programme, there is absolutely no estimate of what the implementation
of this review might mean for revenues? No such exercise has been
Mr Gray: That is what I am saying,
but what it is all about is seeking to create an environment in
which it is easier for us to administer this system. Obviously,
one of the pressures behind the review, and certainly behind issues
that some parts of business have been raising, is the potential
implication of the way in which we operate and conduct the tax
system not only on people's willingness to engage with us constructively
in meeting their tax bills but also potentially at the margin
on their business decisions, and clearly a driver in all this
is seeking to create an environment in which businesses find that
doing their business and paying their tax in this country is,
I will not say more congenial but a more satisfactory relationship,
and that obviously carries implications for the levels of business
and levels of tax going forward.
Q144 Jim Cousins: Can I just be clear
about this, because set out in the report is the creation of an
advisory committee at strategic level, and the report itself is
not a one-person report; it is the product of a great deal of
thinking by a variety of people, some of whom do come from HMRC,
and at no stage in this exercise was a study asked for or done
on tax take? Can that be right?
Mr Gray: The focus is on the environment
within which tax obligations are being met in the UK, and that
clearly potentially has an impact one way or another on levels
of tax take, and if we have a better environment, other things
being equal, one would expect that to have a favourable impact,
but the way we do our business is not the only thing that has
an impact on levels of tax take. The legislative framework which
ministers and the Treasury review from time to time in terms of
setting levels and structure of corporate taxes is also an important
driver in all that.
Q145 Chairman: When you told me that
back office functions like debt management and so on could be
withdrawn from Kent
Mr Gray: Well, part of debt management.
Q146 Chairman: you said they
could be withdrawn to places like Bradford. Could they be withdrawn
further afield? Do you exclude them being withdrawn, for example,
to some overseas agencies?
Mr Gray: We certainly have not
got any plans to do that, no.
Q147 Chairman: On enforcement, you
have since March 2005 carried out three separate consultations
on your review of "powers, deterrents and safeguards".
Why has all that taken so long?
Mr Gray: This is a difficult process.
We are trying to balance some fine judgments here between pressures
one way and the other. It would have been nice to get to conclusions
rather more quickly, but equally it is important to try to get
to conclusions that are going to be most sustainable, and I think
the worst of all worlds would have been if we had rushed through
these processes, gone through inadequate consultation and then
found, for example, that not only the creation of any adjustments
to legislation but also the operation of the system were immediately
coming under scrutiny and attack, so I think getting it right
in this difficult and delicate area is really quite important.
That does not mean I am completely complacent. This process should
not go on year after year.
Q148 Chairman: Are you trying to
introduce the new set of rules for the new organisation or are
you just matching up what Customs and Excise had on the one hand
Mr Gray: No. Predominantly we
are trying to do the former of those, which is to say that within
the context of a unified tax regime, and the environment within
which we are operating and the economic and political considerations
that go with that, what is the right level going forward? Inevitably
that discussion is bound to be influenced and people's views on
where we should go are bound to be influenced by what were the
respective starting points, but I would place it squarely in your
first definition rather than the second.
Q149 Chairman: You were originally
trying to make these changes in the Finance Bill 2006. Are you
going to make the Finance Bill 2007?
Mr Gray: I hope we will be in
a position to do some of that, yes, but obviously it depends on
the continuing process of consultation, and in the normal way
it will depend on all the pressures that arise across the piste
as to what measures can and should be included in a particular
Finance Bill. It is important to say that we are not operating
in a vacuum here, Chairman. We have established sets of powers
that we continue to operate unless or until there is any modification
Chairman: I understand. Right, Mr Gray.
I am going to leave it there. Thank you and your colleagues very
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