Examination of Witnesses (Questions 160
- 179)
WEDNESDAY 28 OCTOBER 2009
MS LESLEY
STRATHIE, MR
SIMON BOWLES
AND MR
RICHARD SUMMERSGILL
Q160 Mr Tyrie:
But you are going to want to take measures to put this right and
some of those are going to cost money.
Ms Strathie: Yes.
Q161 Mr Tyrie:
The obvious question for those who are going to agree to that,
which is ministers, is what is the return, what is the output
measure that you are going to ministers with, saying I need to
do something about morale because if I do I get the following
return?
Ms Strathie: At the moment we
are very focused on those people who are in parts of our estate
which are non-strategic sites, where we have already announced
and ministers have already announced that we will be withdrawing
our operations from those sites, and we are refining the dates
for each of those and serving notice on them, and we have a programme
of work which is focused. Money is made available from Treasury
through our end year flexibility, to target those people as a
last opportunity, can we find any way that they can move to another
job and, if not, to do it. It is expensive to sever and we need
the balance between those people who can be genuinely redeployed
somewhere else and those people who are stranded.
Q162 Mr Tyrie:
But you have not made an estimate of what it is costing you.
Ms Strathie: We know what we have
spent so far—
Q163 Mr Tyrie:
The question is what is it costing you in lost output, lost tax
yield, that is the question.
Ms Strathie: I do not think we
can.
Q164 Mr Tyrie:
Not a penny. Have you lost any tax yield as a consequence of the
fact that your department has poor morale?
Ms Strathie: I do not believe
so, but I do not know so.
Q165 Mr Tyrie:
It is just a quality of life factor in the building then, as far
as the public is concerned we do not want to spend a penny on
it.
Ms Strathie: The vast majority
of our intervention yield comes through our large business effort
and our litigation strategy so in terms of the total workforce
that we have many of the people who will have to terminate their
employment are people who have been with us long serving but in
essence the world has moved on and the systems, processes, structures
by which we achieve the yield have changed significantly.
Chairman: We need to move on; we can
come back to some of these points. Colin Breed.
Q166 Mr Breed:
Can we move on to tax collection which I suppose must be one of
the most important areas, hopefully, of your activity. Between
last November and June this year you agreed 158,000 time to pay
arrangements; how many did you expect to agree, what was your
forecast back at that time and then perhaps looking forward how
many more do you expect to agree? We are trying to get an idea
of the volume of these requests?
Ms Strathie: The first thing to
say is that I consider this a huge success and a real demonstration
of how fleet of foot HMRC can be when asked to deliver. Within
three weeks we had this service up and running. We have always
had time to pay; this was about broadening access and us scaling
it up.
Q167 Mr Breed:
Is that 158,000 extra ones or 158,000 including all the ones that
you would have had anyway?
Ms Strathie: That is the total
but we were doing this on a very rapid service on the telephone
which was the modern part. By 11 October we had taken 335,700
calls from businesses and we had arranged more than 217,700 time
to pay arrangements worth just over £3.8 billion.
Q168 Mr Breed:
Where did the 158,000 come from then?
Ms Strathie: That was probably
the latest briefing that you have there, I am talking about now,
as of October 2009. It is an on-going service.
Q169 Mr Breed:
The number at the end of that period was less than the peak of
it at some stage. You are saying you did 217,000.
Ms Strathie: At October 2009,
this month, the latest total is now 217,700 worth over £3.8
billion. In terms of delivering against those arrangements we
have a success rate above 90% so we see that we have supported
business through this difficult time but also we have brought
more business into compliant regimes.
Q170 Mr Breed:
10% have basically failed to honour their agreement, is that it,
did not pay you anything in the end?
Ms Strathie: I used the term over
90% because I am not talking about a statistically valid series
here, I am talking about where we have got to and what we are
scoring, and some of that is on a sample basis. We know that that
is a high level of compliance.
Q171 Mr Breed:
Have you had repeat requests?
Ms Strathie: Yes, I believe that
in those figures, although I cannot give you the details, if you
consider VAT is something that is quarterly paid then there may
be a case where we give someone a time to pay regime, they deliver
on that and then there may be another time to pay regime on another
head of duty.
Q172 Mr Breed:
Are you reviewing the criteria, making it stricter or keeping
it about the same or what?
Ms Strathie: When I say we got
this up and running in three weeks time on the scale that we were
doing it, it is something that is constantly under review and
we are now developing robust systems and measures because we believe
that this is something that will be with us for quite a long time.
Q173 Mr Breed:
Are you more robust in refusing them now than you were a year
ago?
Ms Strathie: I do not know what
the figures were a year ago in terms of refusals.
Q174 Mr Breed:
Do you know what the criteria were a year ago?
Ms Strathie: Yes.
Q175 Mr Breed:
Are they stricter now?
Ms Strathie: It is very clear:
if someone cannot pay they cannot pay, that criterion does not
change. The extent to which we would look very, very hard in terms
of who they were paying—it remains at the end of the day
that the business has got to be viable, we have to believe that
they can pay over a period of time and that criteria has never
changed, we have just really marketed the service and encouraged
people to come to us and get into a compliant regime rather than
go below our radar if you like and us spend a lot of resource
trying to get there.
Q176 Mr Breed:
Next Saturday it is the deadline for paper tax returns coming
in. As you will be aware there is a potential postal strike action
planned for three days from Thursday.
Ms Strathie: Yes.
Q177 Mr Breed:
Can you provide reassurance that no one who posts their paper
tax return before Saturday will be fined for a late return?
Ms Strathie: I can give you assurance
that we will take the postal strike into account. There is a legal
deadline, as I am sure you know, but we will be very reasonable
in terms of paper returns. We would encourage everybody to file
online rather than use the paper return as the safer option.
Q178 Mr Breed:
The total revenue collected declined last year by about 5%; how
confident are you that this reflects declining economic performance
rather than increased tax avoidance?
Ms Strathie: The analysis would
suggest that most of this is due to the economy. As you know,
figures get revised at Budget time and the Pre-Budget Report,
but what we are seeing is very much the impact on the economy.
Where VAT is concerned you also had the reduction in the rate
of VAT and an increase in debt.
Q179 Mr Breed:
Have you made any estimate at all of how much tax is being avoided
that you might have wished to have had?
Ms Strathie: I do not think that
is something that I can answer. We have issued figures on avoidance
in the past in terms of best estimate3[1],
but it is not a figure I can quote to you today.
1 Note by witness: In March 2008 HMRC released
details of some analysis from 2005 that attempted to derive estimates
of the direct tax gap at the start of the decade-see www.hmrc.gov.uk/research/measuring-tax-gap.pdf.
This included a very broad brush estimate, for conditions in 2002-03,
of direct tax avoided of £5bn-£15bn. As HMRC has made
clear, these figures are far from certain and came from assumptions
based upon agents fees reported in the accountancy press, which
are likely to include commercial tax planning as well as the use
of artificial avoidance schemes. Back
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