Mr.
Gauke: I thank the Exchequer Secretary for her response. I
shall briefly go through the various amendments and respond to her
comments.
On amendment
75, I am grateful for the hon. Lady’s comment that where HMRC
aspires to do something, it will also use all reasonable endeavours to
achieve it. If I understand her correctly, that is helpful, and if we
have her assurance that HMRC will use all reasonable endeavours to
achieve the standards of behaviour and values set out in the charter,
that is also
helpful. I
am less persuaded by the hon. Lady’s comment that amendment 76
is too sweeping. In it, we propose that the charter should set out the
rights and responsibilities of taxpayers, but we do not intend that to
be exhaustive. I am sure that, in her short time in the post, the
Exchequer Secretary has read through the draft charter. I think that if
amendment 76 was accepted, the clause would reflect the charter much
more accurately than it does now. At risk of straying into areas that
will form part of the stand part debate, I believe that the charter
should emphasise the rights and responsibilities of taxpayers, rather
than being a mission statement for HMRC. I am not entirely persuaded by
her remarks, although I am not inclined to press the amendment to a
Division. I
am grateful to the hon. Lady for her remarks on amendments 77 to 79
about regular reviews. I am not sure if the definition of
“regularly” as “reasonably often” provides
as much clarity as it might have done, although I note her comments
that it does not mean every five years. I assume by that remark that
she means that it will happen more frequently than every five years.
There is some clarity
there. I
am particularly grateful to the hon. Lady for her remarks on amendment
80 about consulting with stakeholders. I am not sure that the wording
we propose is so vague as to cause enormous difficulties to HMRC in
complying with the obligation. The meaning of “consult with
stakeholders” is pretty clear. However, the confirmation of the
advisory panel is a helpful remark for which the Committee will be
grateful.
I know that it
is not necessary to withdraw any but the lead amendment, Mr.
Atkinson. With a certain amount of reluctance as far as amendment 76 is
concerned, I beg leave to withdraw amendment
75. Amendment,
by leave,
withdrawn. Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: We have already been debating amendments to the
clause, but the central question this morning is the purpose of the
HMRC charter. It might be helpful to describe the context.
A fairly
regular feature of recent Finance Bills has been that a substantial
part of each Bill relates to HMRC powers. Those powers have been part
of the programme entitled, “Powers, Deterrents and
Safeguards”. I have made the point to the Minister’s
predecessors, at various stages of more than one Finance Bill, that we
tend to hear much more about the powers and deterrents than about the
safeguards. Over the years, Treasury Ministers have answered by
pointing to the existence of the HMRC charter. That charter has evolved
over the past few years and we welcome the statutory recognition given
in clause 91—we certainly will not oppose the clause standing
part of the Bill. However, we have to consider whether the charter as
it has been drafted is sufficiently focused on providing safeguards to
taxpayers or customers, or whether it is lacking in that
regard.
We must also
consider the concerns expressed, in recent years in particular, about
the performance of HMRC. There are two types of concern. First, there
are concerns about the failure of HMRC to raise as much tax as it might
have done. Those centre on underpayment of tax and HMRC’s
failure to enforce measures sufficiently in the right areas, with the
result that it has not got the yield that it might have done. Secondly,
concerns are frequently expressed to all constituency MPs about
failures in the performance of HMRC—that the customer service it
provides has been unsatisfactory.
I suspect
that the area that most MPs have experience of dealing with is tax
credits, but I do not wish have a lengthy discussion about the tax
credit system, and I am sure that you would not wish me to do so,
Mr. Atkinson. However, we have all heard from constituents
who are concerned about HMRC’s treatment of them, about its
inability to get information across, about information going missing,
and about the difficulties of getting to speak to anyone at HMRC.
Lengthy delays in VAT registration and payments were also common a
couple of years ago. There may be good reasons—there was concern
about M-Tech fraud—but there have also been failures within
HMRC, as highlighted by the National Audit Office. Experienced staff
members have not been available because they have been moved around,
and as a consequence the performance of HMRC has not been all that it
might be. There is currently a problem, as I am sure the Minister is
aware, of more general delays in tax repayments from HMRC. It would be
helpful if the she said something about that.
The past few
years have clearly been challenging for HMRC, with the Lyons report,
the Gershon savings, the merger between the Inland Revenue and Customs
and Excise and frequent changes in senior management. It is publicly
acknowledged that HMRC has had a morale problem in recent years. That
was highlighted at
the time of the loss of the disk containing the data of all child
benefit claimants. Satisfaction with the performance of HMRC has been
very low. I assume that the charter is an attempt to address these
concerns, as well as the one I highlighted a moment ago: the balance
between the powers of HMRC and the safeguards that taxpayers should
have in this very important area. That is an issue we have discussed
many times before. I say in
parenthesis that I wonder whether issues of tax administration, to do
with the balance between the rights of the state and of individuals,
belong in Finance Bills, which only this House has the opportunity to
review, unlike a normal Bill. Those issues are different from the
raising of revenue, where this House has rightly been protective of its
monopoly powers. Would some of those provisions benefit from scrutiny
by the other place? How we balance that is at the heart of a liberal
democracy, which makes it somewhat surprising that the Liberal
Democrats are not present this morning.
[Interruption.] I notice that my surprise is not
shared by all members of the
Committee. The
charter is important as a way of trying to provide some safeguards. It
has to be seen in the wider context of debates on previous Finance
Bills. That leads me to some of the concerns expressed about the
content of the draft charter. I thank Ministers for producing a draft
charter last week, as it is helpful for the Committee to have it in
front of us. Such is the timing, however, that I do not think that the
professional bodies that scrutinise such documents closely and provide
support for members of the Committee have had an opportunity to review
the contents. I suspect that, although they welcome some aspects of it,
they still have further questions. My role today is to ask those
questions. 11
am The
first point that must be raised is that there is still a lack of
clarity about whether the charter is intended to be a mission statement
for HMRC or whether it is intended to set out the rights and
responsibilities of taxpayers. The expectation, by and large, was that
the charter was to be for taxpayers, to set out what rights they have
and what obligations they owe. Indeed, one could question the title of
clause 91, which is “HMRC Charter”. Should the title be
“Taxpayers’ Charter” or “HMRC Customer
Charter”? Does the existing title get to the heart of the
matter?
A criticism
raised by the Chartered Institute of Taxation, for example, of the
February draft of the charter was that it rather confused the matter. I
would like to quote the first paragraph of that draft, which was
highlighted by the CIOT. It says that the purpose of the charter
is: “to
make sure that the money is available to fund the UK’s public
services. We also help families and individuals with targeted financial
support. We aim to make the tax and benefit system feel simple to
use.” As
the CIOT said:
“This
belongs in a mission statement, not a
charter.” There
are some amendments to the new charter. However, as far as the first
paragraph is concerned, the new charter, which we have in front of us,
states: “We
collect taxes and duties so that there is money to fund the UK’s
public services. We help families and individuals with targeted
financial support. We also help international trade run smoothly and
protect the UK economy.”
Again, that is of the
nature of a mission statement. The new charter goes on to make comments
that are more focused on the taxpayer. However, the confusion
identified by the professional bodies in response to the February
consultation still remains.
I shall also
be grateful if the Minister can explain one of the changes to the
wording in that first paragraph of the new draft. It
says: “We
also help international trade run smoothly and protect the UK
economy.” There
is no one more committed than I am to the cause of international trade
running “smoothly”; I am a free trader, without any
equivocation. However, I was somewhat surprised that that objective was
seen as a particular focus of HMRC. If HMRC can do what it can to help
international trade, I have no objection to that. Nevertheless, I was
somewhat surprised to see those words in the first
paragraph. I
was also curious about the
wording: “and
protect the UK
economy.” I
would be grateful for the Minister’s view, but my personal
theory is that there was a first draft that stated, “We must
protect the UK economy”, which I suspect was about protecting UK
tax revenues. Then, someone looked at that draft and said, “That
looks somewhat protectionist”, and therefore some wording about
helping “international trade” was inserted, to prevent
there being any protectionist element. I am not quite sure how we got
to this particular wording, but it sits rather uneasily in the first
paragraph about the purpose of
HMRC. We
then have a summary of the rights section and there has also been a
change there from the February draft. The February draft contained the
wording: “Pursue
relentlessly those that break or bend the
rules.” The
professional bodies made two points about that wording. First, they
said that it did not sit comfortably in a list of the rights of
taxpayers. Secondly, it did not fit comfortably with the intention of
the new penalties regime to work constructively with taxpayers to
ensure that they would comply with the rules, and it did not make a
distinction between those who made innocent mistakes and those who were
cheating the Revenue. In that sense, it would be inappropriate to
pursue relentlessly those who break or bend the
rules. The
new draft addresses a concern raised by the Low Incomes Tax Reform
Group that people on low income, who are unable to receive professional
advice and who may make an inadvertent mistake, would be affected. The
February draft appeared to state that such people would be pursued
relentlessly, which was perhaps not the tone that HMRC wanted to
strike. We welcome the new draft’s
wording: “Tackle
people who try to cheat the
system”. I
reiterate that a key obligation and responsibility of HMRC is to tackle
people who try to cheat the system, so we have no query about point 8
of the charter as an HMRC obligation. However, whether that fits easily
into a list of “Your Rights”, is another
matter. I
suspect that the Minister will argue that those who pay their taxes in
accordance with the rules and do not cheat the system will not want
other people to be able to
cheat the system. However, the document does not read easily on that
point, so I would be grateful for her remarks on
it. Mr.
Graham Stuart (Beverley and Holderness) (Con): Does my
hon. Friend agree that it would be better to have three
sections entitled, “Your Rights”, “Your
Obligations” and “HMRC Commitment”? That would be
a better and more logical way of explaining whether HMRC would get the
money by pursuing relentlessly or by tackling
wrongdoing.
Mr.
Gauke: My hon. Friend makes a good point. It might be
better to structure the document so that one section focuses on rights,
another on obligations and another on HMRC’s wider commitment.
The counter-argument is that that takes us back to the confusion
between the mission statement and the rights and responsibilities of
taxpayers. I understand that the charter seeks to address both, but
that would be done more cleanly if the Government and HMRC followed my
hon. Friend’s
suggestion. Let
me say something about the document’s structure. The February
document essentially contained a summary, and that was it; it basically
listed rights and obligations, and did not particularly expand on them.
The structure adopted by other charters, such as those of the OECD and
Australia, provided greater detail in addition to a summary of rights,
which is the route that HMRC has now taken. It is a good structure, and
it is helpful for taxpayers that there are greater explanations on
headline matters. For example, under Your rights, the
charter
says: “You
can expect us
to: 1. Respect
you.” Then,
within the body of the charter, there are helpful details on what
respecting the taxpayer or customer means, such as treating the
customer with courtesy and consideration, listening to concerns, and so
on. However, I wish to highlight some of the suggestions made in
response to the February document that are not covered by the new draft
charter, and I would like the Minister to respond to
them. First,
there is nothing in the charter about taxpayers’ freedom of
information rights. Those rights exist—the Freedom of
Information Act 2000 exists, as all Members of the House are well
aware—and should be in the charter. There is nothing specific
here about rights of appeal. It is not appropriate to put detailed
rights of appeal in the charter. They are complicated matters that vary
in each circumstance, but some indication on rights of appeal would be
helpful. There is nothing specific in the charter about remedies or
compensation available to a taxpayer, or anyone, in the event of
failures on the part of HMRC. Should there be anything in the charter
on that point?
I return to
the issue, which we debated last week, of retrospective taxation. Last
week, I raised the issue in the context of clause 67 in the hope of
obtaining from the Financial Secretary some indications of the
Government’s general approach to retrospective taxation. I do
not think that I was entirely successful. However, some indication of
what a taxpayer can expect from the Government on retrospective
legislation—something perhaps setting out the general principle
that HMRC will not act retrospectively, other than in some fairly
clearly defined circumstances—would be helpful.
The Chartered
Institute of Taxation raised one point that is partially addressed.
That is, if the charter states that it is right for a taxpayer to pay
only the tax that is due, which seems perfectly reasonable as nobody
should be expected to pay more than they are lawfully due, then there
is wording in the charter that distinguishes between those legitimately
trying to pay the lowest amount of tax and those evading tax. I do not
think that anyone would necessarily disagree with an explicit
acknowledgement that people should not be required to pay more than
they are due. Indeed, I think that the Chancellor has commented that
people are entitled to minimise their tax liability, if they do so in a
lawful way.
Mr.
Peter Bone (Wellingborough) (Con): Has it not always been
a duty of HMRC to help taxpayers pay the minimum amount of tax that
they are due? I am surprised that this is something new, because I
understood that it was almost a duty of
HMRC.
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