HMRC: The Control and Facilitation of Imports - Public Accounts Committee Contents

Examination of Witnesses (Questions 60-79)


9 MARCH 2009

  Q60  Mr Touhig: That is your modus operandi, that is how you work?

  Mr Clark: Yes.

  Q61  Mr Touhig: Do you think that is proving effective as far as you are concerned? Are we getting results?

  Mr Tweddle: We are getting results. One figure I can give you is that the heroin seizures which have been made this year are already considerably in excess in both quantity and number of what was achieved in the previous year.

  Q62  Mr Touhig: On the confusion of what is included and what is not included in the EU could you perhaps send us a non-confidential note so we can better understand precisely what you are talking about and perhaps you might want to collaborate with the NAO so we can perhaps get one story.[2]

  Ms Strathie: We know there is no direct comparison for many of the countries. I think that is important.

  Q63  Mr Touhig: Perhaps we could have examples as to why; that would be helpful. In appendix four we see that among the goods banned completely include indecent and obscene material featuring children, obscene material depicted violence, et cetera. In terms of your work are we seeing a reduction in that sort of material coming into the country? Are people using the internet and so on now? Is there some hope that we are seeing some improvement there?

  Mr Tweddle: I think you are right that there is a reduction in the nature of that sort of material because it can cross borders electronically rather than in physical movement. I do not have the figures for the number of seizures with me but we do target paedophilia type material. It is an important priority but, as you say, there are other means of getting this obnoxious material across borders.

  Chairman: Thank you Mr Touhig. John Pugh?

  Q64  Dr Pugh: Can I start by asking you about traditional smuggling of the Robert Louis Stevenson kind? Clearly this is not an area that features in this Report but you must have some sort of private estimate of the nature of that trade compared with the amount of stuff that actually has some documentation but the documentation turns out to be inaccurate or inappropriate and so on. What is your feeling about that? How much do you actually not see at all that is imported into the country in terms of value of goods or in terms of quantity of contraband?

  Ms Strathie: Are you talking about inside the EU?

  Q65  Dr Pugh: I was hoping you would give me some sort of fix on what actually gets into the country be it cigarettes or whatever—which is not detected through any of the normal processes because it does not enter through any of the normal processes.

  Mr Tweddle: The international supply chains for significant quantities of goods go through the traditional ports and the airports. We are not seeing boats turning up on beaches and people bringing containers or anything like that.

  Q66  Dr Pugh: The vast bulk of stuff that should not be in the country in a sense comes in through ports. In terms of the actual process of checking, it says somewhere in the Report (I think it is paragraph 15) that 99% of the duty is collected by automatic transfer. I assume—correctly or incorrectly—that there are two processes going on all the time. There is the containers being pulled out of the ship and onto the lorries and away wherever, and there is another office somewhere where people are actually looking at bits of paper as they shuffle through and payments coming in and so on. Is that an accurate picture?

  Mr Tweddle: It is much more paperless than that, Dr Pugh, in that for every bit of cargo that arrives in the UK there is a declaration made. In 99% of the cases it is done electronically. We have centralised the office dealing with those electronic messages in Manchester. Most of the importers are using what are called duty deferment arrangements so they do not pay the money just as the container moves but on the 15th day of the following month we put a direct debit on their bank accounts for all the money they have clocked up for the previous month.

  Q67  Dr Pugh: There is a presumption that these two streams are connected, that what is on paper corresponds to what is happening on the dock side, in the airports and so on. Presumably you check to see whether that is in fact the case either through the CHIEF system or through local inspection. The CHIEF system seems to be relatively effective but in terms of the local inspections clearly they are triggered by local concerns or maybe a need to make spot checks anyway. Are you in any way capable of assessing whether there are any differences in what I call local competence? It seems to be not a very successful process, just simply opening a container and looking at the paperwork and seeing if they correspond, but it must be more successful in some places than in others. Is it?

  Mr Tweddle: The nature of the traffic going through ports is very different of course in that if you are looking at a roll-on/roll-off port with driver accompanied traffic that is very different from a port dealing with deep sea containers. If you look at Felixstowe, for example, that tends to deal with the Far East and Southampton can deal with Africa, so where the containers are coming from is different as well.

  Q68  Dr Pugh: Would you expect there to be different profiles then?

  Mr Tweddle: There are different profiles.

  Q69  Dr Pugh: These profiles would not entirely be explained by the efficiency of the local inspection the intelligence of the local inspectors; it would be determined to some extent also by the nature of the consignments coming through.

  Mr Tweddle: Exactly.

  Q70  Dr Pugh: Going on to the CHIEF system at paragraph 2.2, the CHIEF system appears to be pretty successful but does not seem to be getting any more efficient. Is that a fair conclusion?

  Mr Tweddle: It is a highly efficient system which has made Britain's import trade essentially paperless and it applies appropriate controls in an electronic environment. It would be difficult on the basis of transaction controls to see how it could be made more efficient.

  Q71  Dr Pugh: I was surprised to learn how much of our imports come in by air, more than come in by sea and far more than come in by road. Is there any difference, in terms of those three different routes or avenues into the country, in the level of fraud and evasion detected?

  Mr Tweddle: The reason why the number of declarations in the air environment is so much greater is because there is a great deal of express traffic and courier traffic so they have a very high number of small consignments, whereas under the maritime system they have a smaller number of very large consignments. If you are looking for things like smuggled cigarettes you are unlikely to get that by air because the volume is too big and you will want to do that by a container or a truck. If you are looking at things like drugs, it is much more likely that they will be travelling by air. It is a little bit like what I said earlier, the nature of the smuggling is affected by the nature of the traffic and the bulk of the traffic.

  Q72  Dr Pugh: So you cannot give percentage figures for each of those means in terms of the level of fraud and evasion.

  Mr Tweddle: We could produce some figures for the fraud and evasion for each of the means but it would be meaningless to compare them unless you have the other analysis.

  Q73  Dr Pugh: In terms of collecting back duties, I was surprised to learn from the NAO Report that you expect every trader to hang onto their documentation for three years and I was wondering whether in fact they did.

  Mr Tweddle: I think the answer is yes.

  Q74  Dr Pugh: All of them?

  Mr Tweddle: Those importing into the country will keep their documentation for the period that they are required to in our experience.

  Q75  Dr Pugh: The last question I have to ask you is about the differential treatment of big business versus small business. I got the impression from the NAO Report that although there was no particular reason for it your focus had been more on smaller businesses than on larger businesses. Am I correct in thinking that?

  Ms Dawes: We try to focus on all sizes of business and we actually have very high staff ratios for the large businesses, with just under 100 staff looking after only 650 customers, accounting for about half of trade by value from outside the EU. We actually try to adopt quite a balanced approach and if anything put really very high resources into the large business side.

  Q76  Dr Pugh: Why is it then that paragraph 12 says, "The revenue generated from audits of large businesses has decreased by 67% in real terms" and then in paragraph 13 it mentions that the proportion of audits identifying irregularities in smaller businesses has obviously gone up and the amount you are getting from them has also gone up. Have large businesses become very law abiding?

  Ms Dawes: They might have done.

  Q77  Dr Pugh: What is your reason for thinking that they might have?

  Ms Dawes: Behind those figures there are two very large individual repayments of VAT duty that were included in the figures for 2006 and if you take those out the reduction in yield from audits from the large business side is—

  Q78  Dr Pugh: Was there a huge serial offender in the previous year?

  Ms Dawes: There were two big cases where there had been very large areas where—

  Q79  Dr Pugh: What, as a matter of interest, were those two big cases about?

  Ms Dawes: We have to be careful here about customer confidentiality. This is an area where, as I understand it, errors were made and where we recently settled quite a large set of issues over a number of years.

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