Mr.
Bone: My hon. Friend raises an important issue. It would
appear that the measure has been introduced only because we are in the
depths of this terrible, Government-caused recession. Does that mean
that it would disappear after a few years, or do the Government believe
that we will be in recession for so long that it will not be a
temporary
measure?
Mr.
Gauke: My hon. Friend makes a good
point.
The
Chairman: Order. Whatever the merit of the point, it seems
to be wide of the
clause.
Mr.
Gauke: Thank you, Mr. Atkinson. I accept that
the Government-made recession is wide of the clause, but there is a
legitimate question. If the human rights angle on privacy is overcome
only because of the exception for the economic well-being of the UK,
which is acute, given the crisis in the public finances, if that is
right—this is based on what I received from CIOT—and if
that is how the legal concern of privacy will be dealt with, what will
happen if and when we are not in a public finances
crisis? My
hon. Friend the Member for Wellingborough raises an interesting point
about whether the legal analysis allowing the clause to exist will hold
together only as long as we are in a crisis. He makes a good point, and
there is all the more reason for the Minister to provide a little more
guidance to the Committee about the basis on which the Government are
confident that they will not run into any legal difficulties with the
clause. If it is the case that the clause will work only for a few
years and then the privacy issue becomes more acute, the Committee is
entitled to know that.
In relation
to privacy, outside bodies have raised concern with regard to the
information that is provided about the tax defaulter, in particular the
address. That sounds similar to a debate that we have had more
generally in this House about the publication of addresses. Some people
have raised concern that revealing that information may cause
particular difficulties to, say, family members and so on. So I would
be grateful to the
Minister if she could give some guidance about how HMRC will use its
discretion—it has discretion in this area—in the
publication of addresses. My hon.
Friend the Member for Wellingborough touched on another interesting
point a moment or so ago about the behavioural effect that the clause
will have on individuals, in particular whether they are more likely to
settle a case or fight on. I can see that matters could go in one of
two directions. On the one hand, the clause could be a sanction that
may encourage someone who has a dispute with HMRC to settle, for fear
of being named and shamed. That was the concern that was raised by my
hon. Friend. There is a particular concern in the context of technical
disputes in which a party is acting in good faith and HMRC says,
“You must settle”. I do not think that that is too great
a concern, because we are talking about deliberate failure to pay.
However, I am very keen to ensure that the clause is not used to put
pressure on a taxpayer who has a legitimate and honest disagreement
with HMRC. I do not think that that is a major concern, but perhaps the
Minister could say a word or two on that
issue.
Mr.
Gauke: I give way to the hon. Member for South Derbyshire.
I have already acknowledged the point about deliberate
non-payment.
Mr.
Todd: The hon. Gentleman has indeed acknowledged that
point, and he has been gracious in giving way. Surely the point here is
not just that the failure to pay must be a deliberate act. In addition,
as the Minister acknowledged, if the taxpayer had an honest dispute and
an arguable case, they would also not fall within the scope of the
clause.
Mr.
Gauke: That is exactly the point that I am making; I want
to ensure that honest disputes do not fall within the scope of the
clause. So I do not think that the hon. Gentleman and I have any
disagreement on that subject.
Mr.
Robert Syms (Poole) (Con): I think that it would help the
Committee if the Minister could give some indication of how many names
are likely to be published. Are we talking about 10, 20, 50, 100 or
1,000 names? Also, as people who have been named might well end up in
our surgeries, is there any kind of procedure to determine, for
example, how many people in Poole will be named and shamed? I would
just like to have some indication of what HMRC thinks the numbers will
be.
Mr.
Gauke: My hon. Friend is absolutely right; indeed, I
touched on that point a moment or so ago. Can the Minister break down
her estimate on a constituency basis? I am sure that the good people of
Poole will not be affected by the clause. However, my hon. Friend makes
a very reasonable point.
The other
point that I was going to make in the context of appeals goes in the
opposite direction, as it were. Some taxpayers may be reluctant to
settle when they might otherwise do so because they are afraid of being
named and shamed, and if they bring finality to a dispute they will be
more vulnerable to being named and shamed and might be more inclined to
fight on.
Presumably HMRC has considered whether that is likely. That concern has
been raised by some outside bodies, and it will be helpful if the
Minister lets us know whether she has any thoughts on the
matter. I
also want to touch on an issue that the Minister raised during our
previous debate on disclosure and protecting taxpayers. Have the
Government considered providing a definition of unprompted disclosure
in the Bill? That might provide additional
clarity. We
have raised various issues in an attempt to probe the
Government’s thinking, but we recognise the benefits that may be
gained from using social pressure to change behaviour. We tabled new
clause 4 to start a debate on how to take that approach further. Clause
93 is the stick, but the new clause could provide the carrot. We are
suggesting a published list of taxpayers who have performed their
taxpaying and reporting obligations in an exemplary way. That list
could be published with details to be agreed between HMRC and the
taxpayer. The requirements would depend on the size and complexity of
the taxpayer’s affairs, and inclusion on the list would not be
prevented because of an honest and technical dispute. We would seek to
provide some certainty about how that would work by requiring HMRC to
publish guidance and to consult with outside
bodies. Will
the Minister let us know whether the Treasury and HMRC are considering
something similar? A gold list of companies that co-operate with HMRC,
pay when they should do, are open when they should be, and provide
information when they should do would be a useful and positive addition
to HMRC’s armoury. It is likely that large plcs and accounting
practices would be keen to demonstrate to the outside world that they
have exemplary tax processes and co-operate with HMRC. It would be a
badge of honour to be on such a list, and that would encourage a
culture of tax compliance. If the Government are not already doing so,
we urge them to consider such
proposals.
Mr.
Bone: I just want to go over a case from a few years ago,
when I was advising a client—it was at the time of Customs and
Excise, and before the combined service was created—who had
taken advice on the treatment of their turnover, which was partly
overseas. They had followed that advice to the letter, but some years
later, a different VAT inspector said that they were wrong and that
they had been deceiving Customs and Excise, which proposed not only
recovery of the VAT, but penalties. The new procedure benefited my
client, who became entitled to a repayment overall. In their case, it
was acceptable to say, “We’ve done it wrong, we’ll
accept penalties and, when we recalculate it, we’ll actually get
a refund of VAT.” They were lucky. However, the managing
director was livid because he had followed the advice of the original
VAT inspector and was absolutely certain that he had done nothing
deliberately
wrong. 5.15
pm I
always advise my clients to accept any liabilities and penalties,
because the cost to the business of fighting them is far more than any
penalty imposed. If someone overcomes that hurdle and says that they
want to fight a case, the Revenue will name and shame, whereas if
someone agrees that they have done something wrong, the only thing they
end up with is a penalty.
I can see the
Government’s reasoning, but, in practice, I believe that more
people will accept that they have done something wrong when they have
not, and that they will not test the case, because being named and
shamed will do enormous damage to their business. I understand what the
Government are trying to do, but there are some practical
difficulties.
Sarah
McCarthy-Fry: It has been an interesting debate. On the
stand part debate, we regard the clause as necessary and proportionate
in relation to the response to serious non-compliance. The clause is
carefully targeted and contains robust safeguards. It also sends a
clear signal that evading tax is wrong, and will be a deterrent for
people who are doing
that. The
penalty regimes on which the publication is based were the subject of
extensive public consultation, and respondents consistently supported
HMRC taking a harder approach towards those who have deliberately
flouted the rules. HMRC has already met with interested external
representative groups about the publication scheme and will continue to
do so up until 1 April 2010 to sort out the practicalities for
implementation, including draft guidance. I emphasise that that will be
introduced only for any penalties after April
2010.
Mr.
Gauke: I am grateful for what the Minister is saying, but
does she not accept that, ideally, the consultation should be done and
the guidance should be issued before, and not after, we
legislate?
Sarah
McCarthy-Fry: We are talking about a point of principle. A
lot of the consultation that we have done has shown that people want
HMRC to take a harder approach, and the provision is part of
that.
Mr.
Gauke: I am sorry to interrupt the Minister before she has
a chance to get going. I accept that the provision is part of a harder
approach, but it is a different type of sanction from those previously
implemented. I do not disagree that tough penalties are necessary; that
is not our concern. This is a new type of penalty and we think that it
is justifiable to use it, but, ideally, surely she agrees that, as far
as this type of penalty is concerned, one should consult first, rather
than produce something out of the blue and then begin the consultation
process.
Sarah
McCarthy-Fry: If we as a Government, the Committee and the
House agree on a way forward on the issue that will help, and the
consultation is ongoing as legislation makes its way through the House,
I think that that satisfies our twin aims. We are trying to bring in a
harder line while also ensuring that we bring stakeholders with us in
the way that it is
implemented. The
hon. Member for South-West Hertfordshire asked why, in 2005, the
Paymaster General declared her opposition to naming and shaming, but
there have been wider changes since 2005 and there is a worldwide move
towards more robust regulation and responses to financial misconduct.
Our recent reforms of the tax penalty regimes mean that it is now
possible to create a scheme in law that is carefully targeted at the
most serious offenders, which was one of the Paymaster General’s
caveats at the time. As regards the Human Rights Act,
I assure the Committee that HMRC has carefully considered all
the issues in developing the publications scheme, and believes that it
is, as set out in law, necessary and
proportionate. The
hon. Gentleman took an extrapolation too far; it is a justifiable
interference in the right to privacy to protect the economic well-being
of the country and prevent crime, but that refers to the economic
well-being of the country at any time. Tax evasion in general is a
threat to the economic well-being of the country. We have carefully
designed the scheme so that any interference with the right to privacy
is kept to an absolute minimum, while still achieving its aims, which
is why the law requires published details to be removed after 12
months.
Mr.
Gauke: The Minister is providing helpful clarity. The
briefing that we received from CIOT was that the question of privacy
did not apply due to the need to protect the economic well-being of the
country, but in addition, it
said: “given
the current economic
climate.” Can
she assure the Committee that there was nothing in the legal advice
that focused on the current economic difficulties and the state of the
public finances and that this is a general requirement to address tax
evasion.
Sarah
McCarthy-Fry: I can certainly confirm to the hon.
Gentleman that it is about the general economic picture and is not
specific to current economic difficulties. Currently the names of those
convicted for deliberate tax defaults are published, but those of
people subject to a civil penalty for such defaults remain
confidential. We are bringing the publication of the details of those
subject to civil penalties for deliberate defaults into line with those
convicted in a criminal court.
The hon.
Member for Poole asked how many names were likely to be published. The
measure is prospective and applies to penalties after 1 April 2010, so
it is difficult to say. We expect the number published to be low
initially, but it could be up to hundreds each year if people do not
change their behaviour as a result of the measure. At this stage I
cannot begin to think what the figures per constituency would
be.
Mr.
Syms: When we talk about published, what do we mean? Do we
mean put on the web? How do you remove a name from the web after 12
months? Are we talking about the London Gazette or will
there be a press notice every quarter? Can we have a little more
information about that please?
Sarah
McCarthy-Fry: We can put such details in the guidance and
consult further on them. It will be published in a way that meets the
requirements of the legislation, so the names will be removed after 12
months. I take on board the hon. Gentleman’s
point.
Mr.
Brian Binley (Northampton, South) (Con): As Members of the
House we have been subjected to a degree of innuendo that has been
translated into an untruth by people out in the big wide world. What is
to stop somebody taking the list for a given 12 months and using it for
four or five years thereafter to create a situation of fear or of
considerable embarrassment for
people, when that should not happen? Are there any remedies that a
person who has been on the list, but is then taken off might take to
prevent that happening?
Sarah
McCarthy-Fry: HMRC will put processes in place to ensure
that names and details are removed. We anticipate publishing details on
the website quarterly with a press notice. We will remove them from any
official publications and from archived press notices. We are not
responsible for whether details remain in the public domain in media
outside our control, such as newspapers. That also applies to those who
have evaded tax deliberately and are subject to the criminal rather
than the civil procedure.
Mr.
Field: This is a pretty unsatisfactory state of affairs,
as my hon. Friend the Member for Northampton, South points out. It is
not simply a matter of having something on a particular website,
because information gets transported to blogs and other websites. Other
than through an extremely extensive and costly mechanism, it will not
be possible to cleanse the entire web of references. Even with not
particularly well-known people, a quick Google search will immediately
bring up a range of blogs containing such
details. To
return to my earlier point, more often than not, wealthy individuals
will be able to bring libel cases against newspapers. If such a case is
victorious, they will ensure that there is an ongoing cleansing of the
web along those lines. For the less well-off, there will be no such
safeguards.
| 
