Sarah
McCarthy-Fry: I return to the point that we are not
responsible for other media. The same applies to those people who have
deliberately defrauded and are subject to criminal penalties. That is
the same if cases are reported in the media. I think that we have the
balance right in pushing this forward. We have the safeguard that the
proposal covers only deliberate actions, which we have debated at
length. Taxpayers will also have the opportunity not to have their name
published if they make a full disclosure. I have explained umpteen
safeguards as we have gone through this
clause.
Mr.
Todd: I am puzzled by the turn of this debate because a
large amount of activity through our minor courts ends up in the public
domain and is then manipulated and used freely by other people for
years to come. Minor county court judgments against people can become
widely available. I am not sure why the thrust of this argument applies
to this particular
circumstance.
Sarah
McCarthy-Fry: I think that we are spending a little too
long on this point, given that most people agreed at the beginning that
it was a good measure that would help in the fight against fraud and in
changing people’s behaviour through
deterrence.
Mr.
Gauke: Perhaps I can attempt to answer the point raised by
the hon. Member for South Derbyshire. He is right that once something
has been published, it is in the public domain. That brings into
question the value of subsection (9), which
states: “No
information may be published (or continue to be published) after the
end of the period of one year beginning with the day on which it is
first published.”
Although the
information will be taken off the HMRC website, it will be in the
public domain. I do not think that that is an enormous deal, but it
brings into question whether subsection (9) is a worthwhile
safeguard.
Sarah
McCarthy-Fry: It is important because HMRC will take the
information off that list. If there is subsequent referral to, that
list was for that period of
time. There
was a question about refraining from publication when there are
security issues. As well as exemptions for those who make full and
timely disclosure, HMRC will not publish names in exceptional
circumstances in which doing so would not be appropriate. Taxpayers
will have an opportunity to make
representations. I
got a bit confused over the two conflicting arguments. One was that
people would fight on, but not settle. The other was that people would
not settle, but fight on. I think that we have sufficient safeguards in
the clause to enable taxpayers to go through the appeal procedure,
which means that whether their tax disclosure is sufficiently complete
and timely to warrant exemption from publication will be subject to
appeal to an independent tribunal. That strengthens the
taxpayer’s
safeguards. New
clause 4 would allow HMRC to publish a list of taxpayers whose record
in paying tax and reporting their liability HMRC considers exemplary. I
welcome the motives behind the clause and the implicit recognition that
publication can affect taxpayer behaviour, whether it be publication of
those who are exemplary or those who have deliberately defaulted. In
many ways, new clause 4 is a mirror image of new clause 3. I share the
view that an exemplary payment and reporting record is something to be
encouraged. Clause
93 reassures taxpayers that there is a level playing field. Under later
clauses, we will examine how the Government propose to reform the
penalties for late filing and late payment to change the behaviour of
those who fall short of this high standard. We will also look at how
the Government aim to make it easier for businesses and individuals to
pay on time using managed payment plans. HMRC is continually reviewing
its relationship with taxpayers, both large and small, to identify what
motivates them to file accurately and pay on time, and what changes
could be made to improve voluntary
compliance. 5.30
pm There
are some practical issues in the clause itself, which means that I must
resist it today. HMRC consulted on the idea of a tax clearance
certificate scheme in June 2007 and in November 2008. Such a scheme is
similar to the aim of the new clause: an assurance that the taxpayer is
in good standing with HMRC, because of the filing and payment record. I
have to say that support for the proposal was lukewarm, with many
unsure how the certificate would be used and seeing it as an additional
level of bureaucracy. For example, the LITRG in their response
said: “What
will such a certificate be needed for? There is little point in
introducing a system which lacks purpose, as this simply creates a
burden of cost, administration and
complexity”. In
addition, we think there would be significant resource implications
from the proposal and it might help if I gave the Committee a flavour
of these. HMRC receives around 23 million returns each year across all
the taxes.
It collects around £450 billion, of which around two thirds is
paid on time. Based on those figures, HMRC would be faced with a
significant burden in potentially publishing the names of the many
million taxpayers whose record appears exemplary. Such a lengthy list
would be of little benefit to taxpayers if their details were buried
away and might not influence the behaviour of others. Employees with
simpler affairs, whose tax is all dealt with through PAYE, should, by
rights, also be on the list and that would render it meaningless.
Furthermore, what would “exemplary” mean in practice? A
taxpayer might file their return on time and pay the liability shown on
that return, but what if the figures on that return were simply
understated? HMRC focuses its resources on high risk cases in order to
deter non-compliance. However, it cannot know the risks in all cases
and cannot check every return to find out more. Doing so would not only
require much greater resources, but would also inconvenience many
compliant
taxpayers. Publishing
the names of people whom HMRC describes as exemplary, but who are known
to others to be otherwise, could have a detrimental impact on voluntary
compliance. The clause includes several areas where HMRC would have to
exercise discretion: “may publish”, “in their
opinion” and “acting in good faith”. As hon.
Members know, safeguards have always been a key feature of our work to
modernise tax administration. I should have thought that we would need
to see some statutory safeguards here. For those reasons, I would
resist new clause 4 and ask hon. Members not to press it. However, I
repeat that we are sympathetic to the sentiment behind it and we will
continue to look at the best way to encourage taxpayers to file and pay
on time, and we will keep this suggestion in
mind. Mr.
Gauke: I thank the Minister for her remarks on clause 93
as a whole. I am not sure that she answered the concern about whether
more taxpayers will fight on rather than settle. In my remarks, I
stated that it could affect behaviour in two different directions. I
welcome her comments that the intention of new clause 4 is correct,
however, I am not sure that all her objections were particularly
strong. There is a case for targeting it towards larger entities, so it
would have a beneficial effect in the corporate area rather than on
every individual taxpayer. I note her comments that the Government
focus on the high-risk areas and do not necessarily dig in to ensure
that the information provided is necessarily correct, but of course it
is a further sanction available to the Government—loss of gold
list status would be something that a large company would be very
reluctant to lose.
I
acknowledge the point that there is more that can be done on safeguards
in primary legislation. I hope that this clause will encourage HMRC to
look further on this and to allow a debate to begin on this particular
point. As I said, the measure would add value, particularly in dealing
with larger companies. When we reach the relevant point, I do not
intend to press new clause 4 to a Division—although I think it
would be a valuable addition to our armoury. I am pleased that the
Minister appears to be suggesting that HMRC and the Treasury will
continue to look at the
matter. Question
put and agreed
to. Clause
93, as amended, accordingly ordered to stand part of the
Bill.
Clause
94Amendment
of information and inspection
powers
Mr.
Gauke: I beg to move amendment 87, in
clause 94, page 47, line 11, leave
out subsections (2) to
(5).
The
Chairman: With this it will be convenient to discuss the
following: amendment 88, in
clause 94, page 47, line 19, at
end insert— ‘(3A) An order
under this section may
not— (a) remove or
weaken a safeguard available to a taxpayer,
or (b) increase a penalty or
HMRC
power.’. Amendment
61, in
clause 94, page 47, line 22, leave
out ‘annulment in pursuance of a’ and insert ‘an
affirmative’. Amendment
62, in
clause 95, page 48, line 2, leave
out subsections (5) to
(8). Amendment
63, in
clause 95, page 48, line 4, at
end insert— ‘(5A) An order
under this section may
not— (a) remove or
weaken a safeguard available to a taxpayer,
or (b) increase a penalty or
HMRC
power.’. Amendment
64, in
clause 95, page 48, line 11, leave
out ‘annulment in pursuance of a’ and insert ‘an
affirmative’. Hon.
Members may note that amendments 62 to 64 relate to clause 95. However,
because they are identical amendments, it seems more convenient to
debate them all together.
Mr.
Gauke: Thank you, Mr. Atkinson, for drawing the
Committee’s attention to the grouping. That is helpful because
essentially the same points are being made. Clause 94 relates to
various amendments of the information and inspection powers brought in
under schedule 47. Clause 95 relates to the extension of information
and inspection powers to further taxes. I am sure that we will discuss
briefly the contents of schedule 47 in a moment, but the concern raised
by this group of amendments is that both clauses 94 and 95 are Henry
VIII clauses that enable primary legislation to be amended by secondary
legislation. Such measures are increasingly being used. Those of us who
had the pleasure of serving on the Committee that considered the
Banking Bill will remember the lengthy debates on that subject. This is
perhaps not of a similar scale, but the concern remains the
same. Let
us remember the context in which we are debating the Bill: again, it is
a matter of balancing the powers of the state with the rights of the
individual. That is an issue with which any liberal democracy has to
wrestle. Again, I note that the Liberal Democrats are not present while
we deal with that issue. When the new regime was brought in under the
Finance Act 2008 in the context of information and inspection powers,
the matter was debated in some length and in detail. The measure was
set out in primary legislation, and rightly so.
In schedules
47 and 48, there are a number of amendments to what we debated in
primary legislation. I suspect that we will not be detained for a great
length
of time in debating these matters, but, none the less, the measure was
published in primary legislation and there was an opportunity for
outside bodies to examine and comment on it. There is an opportunity
for the Committee to give its view on the provisions, but clause 94(2)
states
that “The
Treasury may by order make any incidental, supplemental, consequential,
transitional or transitory provision or saving which appears
appropriate in consequence of, or otherwise in connection with,
Schedule 36 to FA 2008 or Schedule
47.” So
those matters that we debated carefully last year can now be changed by
secondary legislation. The issues that relate to the important balance
between the powers of the state and the rights of the individual can
now be changed by secondary legislation, and clauses 94 and 95 enable
the Government to do so.
We are
concerned about that. We do not see why those matters could not be
dealt with by future clauses and schedules contained in future Finance
Bills, and we therefore suggest a number of amendments. First, I want
to look at clause 94, although the same amendments essentially apply to
clause 95. Amendment 87 would delete subsections (2) to (5) of clause
94, which deal with this matter altogether. So schedule 47 will remain
part of the Bill, but the power given to the Treasury to amend primary
legislation by secondary legislation would be struck out.
If the
Government can make a strong case against amendment 87, amendment 88 is
more difficult for them to oppose. It would provide a safeguard in the
Bill that
“An
order under this section may
not— (a)
remove or weaken a safeguard available to a taxpayer,
or (b)
increase a penalty or HMRC
power.” I
believe that that is the Government’s intention in this area, or
at least as far as these orders are concerned. Perhaps some sort of
reassurance to the Committee would be helpful. None the less, amendment
88 would at least provide some safeguard from misuse of
clause
94. Amendment
61 states that any statutory instrument in this area should be subject
to an affirmative resolution as opposed to the negative procedure,
which it is envisaged will apply. Essentially the same amendment
applies to clause 95. Amendments 62 to 64 relate to the extension of
information and inspection powers to further taxes.
It is
incumbent upon the Minister to explain why it is necessary to have
clause 94. What do the Government have in mind? Why can the matter not
be dealt with in primary legislation? What scrutiny will exist as far
as these provisions are concerned? I can see that there is an argument
for administrative convenience. However, given that we are talking
about quite important powers that HMRC may have and that potentially
there will be a loss of some safeguards for the individual, we are
reluctant to allow clauses 94 and 95 to remain unamended. We look
forward to hearing the Minister’s
comments.
The
Economic Secretary to the Treasury (Ian Pearson): I was
deeply disappointed not to be able to contribute to this
morning’s proceedings, Mr. Atkinson, so it is a great
pleasure that I can serve under your wise suzerainty this afternoon. As
you rightly point out, the group of amendments relates to clauses 94
and 95, which introduce schedules 47 and 48
respectively.
As the hon.
Member for South-West Hertfordshire indicated, the group of amendments
also relate to the powers introduced in schedule 36 to the Finance
Act 2008. As he also rightly pointed out, those powers are
part of a package of measures to align and modernise the various
powers, deterrents and safeguards inherited by HMRC from the former
Inland Revenue and Her Majesty’s Customs and Excise. We had a
significant debate last year on these matters.
The powers
in schedule 36 allow HMRC to check if the right tax has been paid or
claimed in respect of VAT, income tax, capital gains tax and
corporation tax. They came into force on 1 April.
It is right
to say that last year’s debate focused on the need for proper
safeguards. I believe that that debate was invaluable as it directed
HMRC to the key issues that needed to be addressed in the guidance to
staff. In turn, that has helped to ensure that the powers can be used
appropriately and proportionately. I can report to the Committee that
that guidance, along with associated training information, has now been
published, following consultation with key stakeholders.
What we are
trying to do as a Government is to ensure that there is a balanced
approach to the way in which HMRC uses these powers. That approach has
been warmly welcomed and I want to put on record my appreciation and
that of the Chancellor and the Financial Secretary to those who have
helped HMRC to develop
it. 5.45
pm Both
clauses contain a provision to make Treasury orders and consequentially
to amend other legislation as a result of the powers in schedule 36.
The intention is to repeal existing information and inspection powers
when schedule 36 can be used instead, and to make other consequential
amendments to avoid leaving overlapping powers in place. The hon.
Gentleman said that these are Henry VIII powers, and I think he was
referring to our debates on clause 75 of what was then the Banking
Bill. Clearly, we are discussing something of a different order
here.
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