Examination of Witnesses (Questions 260-279)
MR DAVE
RAMSDEN, MR
MIKE WILLIAMS,
MR EDWARD
TROUP, MS
SARAH MULLEN,
MR CHRIS
MARTIN AND
MR SIMON
GALLAGHER
18 MARCH 2008
Q260 Mr Dunne: Yes, the increase
in receipts from council tax appears to be just over 5% compared
to assumptions.
Ms Mullen: Our expectation of
council tax in—
Mr Ramsden: It is set out in paragraph
C66 of the document, and I think the assumptions we are making
there are unchanged.
Q261 Chairman: Look at that and we
will come back to you and maybe write to you on that before tomorrow
if need be.
Mr Ramsden: Okay. Can I say that
the assumption is 4%?
Ms Mullen: Our expectation in
2008-09 is that council tax rises will come in at about 4%.
Q262 Mr Dunne: So why does the table
say 5%?
Ms Mullen: I think we will have
to provide a note on that. [4]
Q263 Peter Viggers: I have some questions
about the assumptions underlying the treatment of non-domiciled
taxpayers. How many people are you assuming will leave the United
Kingdom?
Mr Williams: In the consultative
document that we issued in December the assumption is that it
will be around 3,000 people but, as we said in that document,
estimating in this area is particularly difficult because there
is a limit to the amount of data.
Q264 Peter Viggers: What effect are
you assuming on the economy of them departing?
Mr Williams: I think 3,000 people,
not necessarily all of whom are particularly wealthy people, would
not of itself have a very significant effect on the economy.
Peter Viggers: Of the remaining people
in the United Kingdom who are affected by the change of rules
how many will be in employment and are you anticipating that employers
will compensate them for increased taxation? That is the first
question. Secondly, how many people will be casuals? I am talking
now about Polish plumbers. How many of them will be affected?
Jim Cousins: There is nothing casual
about Polish plumbers.
Peter Viggers: The final question is,
can the HMRC cope? What assumptions have you made about the numbers
of those remaining?
Q265 Chairman: Do you want to write
to us on that as well before tomorrow?
Mr Ramsden: I think we can answer
the question. We can be comfortable that HMRC can cope.
Q266 Chairman: Fill in the details
for us tomorrow, will you?
Mr Ramsden: Yes. [5]
Q267 Mr Brady: The consultation on aviation
duty is coming towards its end. Will freight be included?
Mr Martin: That consultation will
not finish until, I think, 24 April. Our presumption is that it
will be but the consultation is open and obviously ministers will
consider the results of the responses from the consultation and
then announce final decisions in the PBR later this year.
Q268 Mr Brady: Is the Budget announcement
of a 10% increase in the revenues to be brought in by the new
tax based on a change in assumption about the number of taxable
flights or a change in the rates to be levied?
Mr Martin: We have not set the
rate yet. What we do to generate the revenue projections whilst
we are undergoing the consultation is that we essentially model
the counter-factual using air passenger duty, so we would assume
an increase in rates of that to generate that particular rate
of revenue. When we come to set the rate under the new system
after a decision has been made about the exact design of it then
we will set a rate appropriate to generate the amount of revenue
that we forecast.
Q269 Mr Brady: You have already said
that it will be 10% higher in the next year.
Mr Martin: Yes.
Q270 Mr Brady: That is based purely
on a 10% increase in rates?
Mr Martin: No. It depends what
your counter-factual is. For the purposes of modelling it for
the forecasts here we have actually used air passenger duty as
the counter-factual because we do not have a final design of the
scheme because we are consulting on that.
Q271 Mr Brady: But you have already
said there is going to be a 10% increase on whatever it is you
levy in the first year of operation of the new rates.
Mr Martin: That is right.
Q272 Mr Brady: So that is based purely
on a 10% increase in the rate, whatever that rate may be?
Mr Troup: Shall I just come in?
The actual number is derived as 10% higher than the yield would
have been for the second full year of operation of aviation duty,
and, as Chris has said, that will be delivered through an appropriate
rate setting in the new duty.
Q273 Mr Brady: I have one final question
on this regarding the impact on regional services, particularly
those connecting to long haul. What assumptions are you making
about the number of passengers travelling from regional airports
currently going to Heathrow or other London airports to connect
to long haul flights who it is said will use a continental hub?
Mr Martin: I do not think we have
made an assumption about that because, as I say, that is not the
way we have modelled the spending. When we have a final design
for the scheme, and that will depend on the results of the consultation,
we will then need to apply a model to that to assess what the
yield would be under various different rates and you might well
consider those sorts of factors there if we felt at that point
that the design of the scheme was likely to have that kind of
behavioural effect.
Q274 John Thurso: Who would be responsible
for taxation matters in regard to small businesses?
Mr Troup: That would be me.
Q275 John Thurso: Do you have somebody
on your team who is responsible for small businesses?
Mr Troup: We have a team which
deals with taxation of small and medium sized enterprises, yes.
Q276 John Thurso: How many people
are in the team?
Mr Troup: I cannot give you an
exact number. It is about ten or 12 and they work closely with
other colleagues in the Treasury who also work on other business
tax matters, and also with colleagues dealing with other business
matters, so it is quite hard to say because small business tax
can, for instance, overlap with capital gains tax where Mr Williams
has a team, and with other non-specific—
Q277 John Thurso: So a reasonable
sized team. What estimates have they made of the amount of revenue
being lost through income shifting?
Mr Troup: The estimates of revenue
are done by Her Majesty's Revenue and Customs in the usual way
and, as you will have seen from the Pre-Budget Report, we expect
the introduction of income shifting rules, once they are agreed,
to produce about £260 million.
Q278 John Thurso: We have had estimates
that it will cost as much as that to administer it. What estimates
have you made about that?
Mr Troup: Our estimates are much
lower because I think there has been a considerable misunderstanding
as to the number of businesses that will actually be affected.
The costings are based on the assumption that 85,000 businesses
will be affected. One of the things that has come out of the excellent
consultation that we have had on this, and we had over 260 responses,
was that there are a lot more businesses out there which are concerned
that the legislation might apply to them and from whom I think
some of the wilder figures that we have seen about the potential
costs have been derived.
Q279 John Thurso: What estimate have
you made of the potential cost? Presumably, if you have a husband
and wife business, the income available has to be over 40% tax
to start with. If you paid the maximum amount to the wife you
would have the benefit of the personal allowance, the benefit
of the difference between 20p and 40p, and you would net off the
extra national insurance that would have to be paid that would
not be being paid if it was 40p, so you are probably going to
end up with a maximum take per person of round about £6,000
or thereabouts. You then have to assume that everybody is capable
of being at the maximum. Do those figures sound about right?
Mr Troup: Sorry—I am not
sure whether your question is about the costs of administering
or the actual tax burden.
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