 House of Commons |
Session 2008 - 09 Publications on the internet General Committee Debates Finance Bill |
The Committee consisted of the following Members:Liam Laurence Smyth,
Committee Clerk † attended
the Committee Public Bill CommitteeTuesday 23 June 2009(Afternoon)[Mr. Peter Atkinson in the Chair]Finance Bill(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)Clause 93Publishing
details of deliberate tax
defaulters 4.30
pm
Mr.
David Gauke (South-West Hertfordshire) (Con): I
beg to move amendment 81, in
clause 93, page 45, line 27, leave
out ‘£25,000’ and insert ‘the greater
of— (i) £25,000
or (ii) a percentage of the
person’s income as determined by an order made by the
Treasury.’.
The
Chairman: With this it will be convenient to discuss the
following: amendment 82, in
clause 93, page 45, line 30, after
‘deliberate’, insert ‘and
concealed’. Amendment
83, in clause 93, page 45, leave out lines
32 to
40. Amendment
84, in
clause 93, page 46, line 14, at
end insert— ‘(5A) No
information may be published without the consent of the Chief Executive
of Her Majesty’s Revenue and
Customs.’. Amendment
85, in
clause 93, page 46, line 18, at
end insert ‘and (c) inform the
person of his right of appeal under subsection (11A)
below’. Government
amendment
305 Amendment
86, in
clause 93, page 46, line 36, at
end insert— ‘(11A) No
information may be published until the person has had the opportunity
to appeal to the First Tier Tribunal for an in-camera hearing against
the decision to publish details of that
person. (11B) The Treasury may
by order made by statutory instrument make provision for and in
connection with appeals to the First Tier Tribunal under subsection
(11A).’.
Mr.
Gauke: I welcome you to the Chair, Mr.
Atkinson. From the outset, I make it clear that we do not necessarily
object to the use of the naming and shaming provisions in clause 93.
However, we have a number of specific concerns, some of which we have
addressed in this group of
amendments. Clause
93 sets out a new regime for publishing details of deliberate tax
defaulters. This is, as we will debate at slightly greater length, an
arrangement that was not consulted on before the Budget and, with the
publication of the Finance Bill, a number of specific concerns have
been raised about the regime. I will briefly set out the concerns that
we attempt to remedy in the amendments,
the first of which is that the application of the naming and shaming
regime applies where there has been potential lost revenue, in relation
to the relevant penalty, of more than £25,000. That can be an
amount that applies to a number of different taxes and may have accrued
over a number of different tax years. The particular concern of a
number of outside bodies is that the £25,000 limit is a blunt
instrument. Clearly, £25,000 in lost revenue would be quite
considerable for most individuals or small companies. However, for a
very wealthy individual or a large company or partnership,
£25,000 is not particularly considerable and there is a danger
that this naming and shaming regime may apply to relatively small
amounts.
Consequently,
amendment 81 seeks to make the £25,000 test a bit more
sophisticated, if I can put it that way, in the sense of still having a
de minimis requirement of £25,000, but for an entity or for a
person with a large income there shall also be a test of a percentage
of that income. That would prevent the concern, raised by a number of
outside bodies, that persons may be caught for what is, in their
overall tax liability, a small amount of money.
We are keen
to hear the Minister’s assessment of why the £25,000
figure was chosen and whether it is possible to have a differential
rate so that we can assess the scale of the mischief, or the scale of
the tax default, by the person concerned.
Amendments
82 and 83 look at the issue of a relevant tax penalty and what sort of
activity should fall within that. It is an attempt to tighten this
definition set out in clause 93(2). We are not wedded to any particular
wording in this area, but we would like to explore the thinking here.
There is a reasonable argument to be made that a new penalties regime
has just come into effect, that this naming and shaming regime is being
bolted on to it and that, at least in the initial months and years of
this regime, it should be focused upon the very clearest cases of tax
default, where we are looking at deliberate inaccuracy and concealment,
rather than being broader. A criticism could be made of this regime
that it is not focused as much as it might be, but I would put this in
the context of a new regime—why not start it off in a fairly
narrow circumstance with a view to broadening it
out?
Mr.
Todd: I may have misunderstood the hon. Gentleman, but the
thrust of his amendments appears to be to protect the privacy of those
with very substantial net worth who may have significant tax
liabilities on which they deliberately default. Am I right in thinking
that that is the thrust of what he is attempting to do
here?
Mr.
Gauke: I think that the concern that he is raising is with
amendment 81, rather than 82. The concern behind amendment 81 is a
relatively small error on the part of a large taxpayer. I suspect that
the hon. Gentleman is going to make the point about deliberate
inaccuracy, and, do not get me wrong, these are not people whom we are
desperate to protect. None the less, this is a new
regime coming in which is in addition to the existing penalties regime.
If we are going to have something in addition to it, it is right to
test the scope of it. In particular, the concern raised by outside
bodies is that this new regime may be a bit broader than it should be
in its initial stage. There is an argument for extending it as we see
how it works. For most of us, a sum of £25,000 is a very
considerable one, but not so in the context of a larger business. The
point has been made by, I think, the Chartered Institute of Taxation,
that a relatively small failure to account for tax on a transaction
between a company and a director may involve additional PAYE, National
Insurance contributions, VAT and tax under the beneficial interest
rules and that these quickly accrue to a sum greater than
£25,000.
Mr.
Todd: Surely the test is deliberateness, is it not? One
would agree that honest errors are dealt with in a different way. Quite
how one establishes deliberateness, other than by a paper trail showing
that someone conspired to achieve this, is another matter, but that is
the critical
test.
Mr.
Gauke: Of the various levels of misbehaviour, the highest
test is deliberate inaccuracy and concealment, and we are suggesting
focusing on that because that is the clearest case of what, not to put
too fine a point on it, most of us would consider to be of a fraudulent
nature. Why not focus on the most egregious cases? Outside bodies argue
that the measure is broader than it might be, so let us explore
that. The
other amendments, which are less controversial, focus on the issue of
publication and the circumstances in which publication should be made.
Amendment 84 proposes that consent should be given by the chief
executive of HMRC before information is signed off with regard to a tax
defaulter. Again, this is partly a probing amendment. I hope that the
Minister will be in a position to reassure the Committee that
publication will occur only after a senior executive from HMRC has
signed off these matters. Naming and shaming should not be a decision
that is taken lightly.
Amendments
85 and 86 relate to the issue of a right of appeal. It is worth making
the point that naming and shaming in this way is very much a penal
action. It is likely to have a very significant effect on the
reputation of the person being named and shamed. In the stand part
debate, I hope that we will be able to examine in a little more detail
the potential human rights angle to this and concerns about a breach of
privacy. Clearly, in defending their case against an action brought on
the basis of the Human Rights Act 1998, it will be helpful to the
Government to have a satisfactory appeal mechanism. Clause 93, as
currently drafted, does not seem to address that particular concern. It
may well be that the Minister can give the Committee some reassurance
on that particular point. The need for an appeal mechanism is addressed
by amendments 85 and
86. I
have various broader points that I do not intend to go into at this
stage, but we would be grateful for the Minister’s response on a
number of points that seek to ensure that clause 93 works as
effectively as
possible.
The
Exchequer Secretary to the Treasury (Sarah McCarthy-Fry):
Welcome back to the Chair, Mr. Atkinson. Clause 93, as set
out by the hon. Member for South-West
Hertfordshire, provides for HMRC to publish details of deliberate tax
defaulters. The clause has been introduced to send a clear signal that
evading tax is wrong, to deter people from doing it, to reassure those
who pay the right tax and to encourage those who do not do so to come
forward and make good. Amendments 81 to 86 and Government amendment 305
all seek to ensure that clause 93 is closely targeted and that strong
safeguards are in place. I should like to reassure the Committee that
the Government support both those aims.
The clause
relates to a deliberate intention to give HMRC inaccurate documents or
not to meet obligations so as to gain a tax advantage. Careless errors
or failures, whether or not penalised, will not trigger publication
whatever their size, nor will taking a reasonably arguable view of the
tax situation, even if it is not upheld. There will be exemption from
publication for those who make a full disclosure of their defaults,
either unprompted or prompted by HMRC. That means that everyone will
have the chance to escape publication by coming forward and making
good.
Mr.
Mark Field (Cities of London and Westminster) (Con):
Although I am reassured that there has to be some deliberate intent, is
there not a concern that powerful people with deep pockets and concern
about their reputation and libel laws will be able to muscle their way
in to ensure that their position is protected. Notwithstanding any
Human Rights Act opportunities, it will be the less powerful who fall
foul of the measure. The overwhelming concern is that individuals who
realise the potential for reputational damage and the risk of going to
court—the cost and everything else—will have an
opportunity to ensure that officials are persuaded not to put them on a
list, whereas the less powerful will be voiceless in that
regard. 4.45
pm
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