Sarah
McCarthy-Fry: I do not agree with that premise. We will
probably come on to that matter when we debate clause stand part. The
clause will strengthen our ability to bring people who deliberately
withhold information and default to
account. Mr.
Peter Bone (Wellingborough) (Con): Minister, is the
problem not that there are normally two points of view to an argument?
If the Revenue says, “This is a deliberate error,” the
client will say, “No, actually it wasn’t a deliberate
error.” The Revenue will then go back to them and say,
“If you make a full confession now, we won’t publish, but
if you don’t, we will name and shame you.” My advice to
the client would be to say, “Even if you haven’t done
wrong, accept a confession because your name won’t be
published.” Is that not very unfair on the
taxpayer?
The
Chairman: Order. Before I call the Minister to reply, I
should say that this is moving into clause stand part territory. I
would be grateful if the Minister answered the hon. Gentleman’s
question
later.
Sarah
McCarthy-Fry: I take your advice, Mr. Atkinson,
and will answer that question when we come to the clause stand part
debate.
Both
amendments 81 and 82 deal with the criteria for publishing the names of
deliberate tax defaulters. The Bill states that the deliberate
understatement must be at least £25,000. Amendment 81 would
change that to the greater of £25,000 or a certain percentage of
the person’s income, but it does not specify what the percentage
could be. Two things are wrong with the amendment: it is wrong in
principle and in practice. The Bill states that at least £25,000
of tax must have been understated. That is the amount of tax uncovered
in an investigation, which may include more than one tax, more than one
period and more than one type of deliberate default. A number of
factors were taken into account in arriving at £25,000:
international comparisons, sentencing guidelines for non-tax financial
frauds and the need to send a clear message that tax evasion is
wrong.
I think that
most people agree that evading tax to that extent is a serious matter,
whatever the level of income. There is no justification for taxpayers
on higher incomes to be subject to different limits. To impose such
limits would be wrong in principle and unfair. Taxpayers on higher
incomes and large companies who evade tax should face the same
consequences as others and, like any other taxpayer, they may avoid
publication by making a full disclosure to HMRC, even when challenged.
I also think that the amendment is technically flawed. The
£25,000 limit relates to the tax lost. That might be a reference
to income understated, as suggested by the amendment, but it could just
as easily relate to understated capital gains, VAT or excise duty on
goods misused. I urge the hon. Gentleman to withdraw his amendment on
that
basis. Amendment
82 would narrow the scope of the scheme, so that it applies only to
those whose defaults are both deliberate and concealed. However, clause
93 already ensures that publication is restricted to where a person
knowingly and intentionally gives HMRC an inaccurate return or
deliberately does not tell HMRC of a new taxable activity to gain an
unfair tax advantage. Concealment, such as submitting false evidence to
HMRC, is aggravating conduct and attracts a higher penalty. All
deliberate understatements, whether involving concealment or not, are
fraudulent. It is important to send a clear signal that all tax evasion
is wrong, and consequently the £25,000 limit is a better
restriction than using the deliberate and concealed category of the
penalties. Amendment
83 would reduce the scope of the scheme so that it covered only
inaccurate documents—returns, claims and accounts. It would
exclude other forms of tax evasion such as deliberately supplying false
information, causing a tax return to be inaccurate or, for example,
knowingly supplying red diesel, which is subject to a lower rate of
duty, to commercial haulage firms rather than for agricultural use as
permitted. Each of the other categories specified in the Bill creates
an illegal, unfair advantage for the perpetrator. Some categories, such
as the misuse of red diesel, represent a significant attack on the tax
system. It is estimated that £350 million is lost to the
Exchequer each year from the illicit market in petrol and diesel. It is
important that HMRC has the full range of tools at its disposal to
combat such attacks. Those responding to HMRC consultations have
consistently called for HMRC to come down hard on those seeking an
unfair advantage. For that reason I cannot support amendment
83.
Amendments
84, 85 and 86 concern safeguards within the scheme. Amendment 84 would
require the chief executive of HMRC to authorise publication of all
details. Amendments 85 and 86 seek to create a separate appeal right
against a decision by HMRC to publish details and to create a
requirement to inform the person of their right to appeal. I want to
emphasise and put it on the record that the Government agree that there
should be robust safeguards. These are already built into the scheme
and the penalty regimes on which it is founded. Government amendment
305 further strengthens the safeguards. There is a right of appeal to
an independent tribunal against all the tax and penalty decisions that
determine whether a name will be published. The criteria for
publication are tight and are laid out in primary legislation. Everyone
will have an opportunity to escape being named by making a full
disclosure, even after challenge by HMRC. Taxpayers will be informed
prior to publication and may make representations to HMRC that naming
would not be appropriate. Names will be removed after 12 months. Both
HMRC and I recognise the importance of getting this right. A senior
HMRC officer and a central team separate from the investigators will be
responsible for pre-publication checks to ensure that the details
published are accurate. I do not think it necessary or practical to
include such authorisation in the Bill.
We have
concluded that a separate appeal right against publication is not
appropriate for a number of reasons. There is an appeal right to the
independent tribunal against all of the decisions that underpin
publishing details: the amount of tax and penalty, the behaviour
category—whether the default was deliberate—and the
quality of the taxpayer’s disclosure. Government amendment 305
further strengthens taxpayer safeguards by ensuring that all
considerations about disclosure, including its timing, will be taken
into account when arriving at the penalty level and will be appealable.
All of these appeal avenues must be exhausted or expired before details
may be published. This leaves the only element of discretion within the
publication scheme itself at the start of 93(1) which provides
that “The
Commissioners may publish
information”. To
ensure consistency and fairness, the presumption will be to publish
where the criteria are met, unless there are exceptional circumstances
after consideration of the taxpayer’s representations. Examples
might include prejudice to an ongoing criminal investigation or risk of
physical harm.
The
appropriate route for a taxpayer to challenge such administrative
decisions is directly with HMRC or by judicial review. Although
amendments 85 and 86, as I have already said, would create a separate
right of appeal, it is difficult to see what the grounds for such an
appeal might be. An appeal against publication would also be a one-way
bet, with the taxpayer having nothing to lose by appealing. We are
concerned that tribunal resources would be unduly tied up with spurious
appeals and the impact of this important deterrent effect would be
undermined.
By contrast,
Government amendment 305 reflects a small but significant change in
policy in the taxpayer’s favour. It will reduce the extent of
HMRC’s discretion and provide greater clarity to taxpayers as to
how they can avoid their details being published, namely by making a
full disclosure, whether prompted or unprompted,
which would qualify for the full reduction under the penalty
legislation. That means that all consideration as to whether a
taxpayer’s disclosure is sufficiently complete and timely to
warrant exemption from publication will now be subject to appeal to an
independent tribunal. That will be under the penalty appeal provisions.
This strengthens taxpayers’ safeguards and addresses concerns
underlying amendments 84 to 86. The amendment will also bring greater
clarity for taxpayers about what they must do to escape publication.
First and foremost, the message is not to evade tax in the first place
but, if they have done so, taxpayers should come forward to HMRC
swiftly and make good in full. One of the lessons learned from the
Irish experience is the importance of having clarity and certainty in
this area. The amendment should help to achieve that. The safeguards we
already have in the Bill together with Government amendment 305 are
robust and sufficient. I hope that I have managed to satisfy the
concerns of the hon. Member for South-West Hertfordshire and would ask
him to withdraw his
amendments. Mr.
Gauke: I thank the Minister for her response. She has
dealt adequately with amendments 81, 82 and 83, and I accept her
arguments. I may not have taken it in, but I am not sure whether she
made a specific commitment on the signing off by senior
staff.
Sarah
McCarthy-Fry: A senior
official.
Mr.
Gauke: I apologise to the Minister for not picking that
up. I
am grateful to the Minister for acknowledging that all the amendments
that we tabled attempted to make the provisions closely targeted or to
ensure that they would work. I am grateful to the Government for
amendment 305, which is an attempt to address the concern over the
appeal process. I am not sure that I was persuaded by her argument
about a taxpayer having the ability to appeal to HMRC or to seek
judicial review. That is a very high test. However, I note her comments
on the various opportunities that a taxpayer would have in the appeal
process. I am not sure that the questions over that process are
entirely resolved. However, I will not press the amendment to a
Division. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Amendment
made: 305, in
clause 93, page 46, line 27, leave
out from ‘paragraph’ to end of line 36 and
insert ‘10 of Schedule
24 to FA 2007, or (b) paragraph 13 of
Schedule 41 to FA
2008, (reductions for
disclosure) to the full extent permitted.’.—(Sarah
McCarthy-Fry.) Question
proposed, That the clause, as amended, stand part of the
Bill.
The
Chairman: With this it will be convenient to discuss new
clause 4— Publication of taxpayer ‘gold
list’— ‘(1) The
Commissioners may publish a list of taxpayers who, in the opinion of
the Commissioners, have performed their tax paying and reporting
obligations in an exemplary
manner. (2) The details of a
taxpayer identified under subsection (1) shall be as agreed between the
Commissioners and the taxpayer.
(3) In making an assessment of the inclusion of a
taxpayer for publication under subsection (1), the Commissioners shall
take into account the size and complexity of the taxpayers’
affairs. (4) The Commissioners
shall not refuse to list a taxpayer under subsection (1) on the grounds
that— (a) the taxpayer
has taken reasonable measures to minimise his tax liability,
or (b) the taxpayer, acting in
good faith, is in dispute with HM Revenue and
Customs. (5) The Commissioners
must publish guidance as to the criteria that shall be used in
assessing whether a taxpayer should be identified under subsection
(1). (6) The Commissioners must
consult with stakeholders before publishing any guidance under
subsection
(5).’.
Mr.
Gauke: Let me reiterate that we share the
Government’s objective in clause 93 of having an additional
sanction to take against those who deliberately do not pay the
appropriate amount of tax. We welcome the use of social pressures in
that context. It may be that the Government are waking up to the nudge
agenda that is so popular among the Opposition. We also recognise that
countries such as the Republic of Ireland have made use of this kind of
regime. The objectives are worthy, but we have some practical concerns,
many of which the Minister has allayed with the amendments that we have
discussed. I
shall begin by asking where the naming and shaming measure came from.
There was no indication prior to the Budget that the Government
intended to do anything like this. When it has been considered in the
past, the Government have been unenthusiastic about it. On
22 May 2002, the then Paymaster General, the right hon.
Member for Bristol, South (Dawn Primarolo), stated in evidence to the
Treasury Select
Committee: “I
have to say that I am not at all attracted to it because of naming and
shaming incorrectly or the consequences and the balance with taxpayer
confidentiality.” It
would be helpful to know why the Government changed their mind. Why was
there no consultation before this proposal was announced in a Budget
notice? This
debate is similar to the one we had this morning on the new signing off
requirements for senior accounting officers, because this measure
appears to have emerged from nowhere. Has it been sitting on the back
burner for years before being suddenly plucked out? Was it introduced
because of changing economic circumstances and the crisis in the public
finances? What caused the Government to bring it forward this year,
when they previously had no interest in
it? I
also raise the point about timing in the context of the new penalties
provisions that have just been brought in. Given that we spent a great
deal of time last year and the year before debating penalties, why was
this measure not dealt with then? If it is something that the
Government have come to relatively recently, was there any thought of
holding it back, at least until we see how the new penalties regime
works? It seems that the Government are somewhat open to the criticism
of making policy on an ad hoc
basis. 5
pm I
seek some clarity from the Government. Presumably they have looked
closely at the extent to which the naming and shaming provisions will
actually be used. In implementing the new penalties regime, I believe
that
they looked at several dead cases to see how the new regime would have
applied to them. Have they looked at those cases also in the context of
clause 93 and the naming and shaming provisions? Do the Government have
a view as to how many cases the provision will apply to in the course
of a typical year? What scale of offence are we talking
about? The
next area of concern relates to privacy implications, and I say this in
the context of the Human Rights Act. I know that the Government are
reluctant to reveal any legal advice that they have received, but the
Chartered Institute of Taxation brief on the clause
states: “We
understand that HMRC have taken advice and consider that the right to
privacy in such cases will not apply on account of the exception for
economic wellbeing of the country given the current economic
climate.” It
would be helpful to the Committee if the Minister could say as much as
possible about the legal advice on this matter. What concerns do the
Government have that there is not a privacy issue, or at least not one
that cannot be overcome, and is that on the basis of the economic
circumstances?
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