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Baroness Noakes: Perhaps I may clarify the point on extra statutory concessions. As I understand it, they apply only to the Inland Revenue. When we have the merged organisations, will they apply to other taxes currently operated by Customs and Excise? The one which obviously comes to mind is VAT because it is a business tax and when it was first introduced which department it went into was decided almost on the toss of a coin. As I understand it, there is a similar mechanism. Are we going to have old Inland Revenue and old Customs and Excise carrying on in the new organisation?

Lord Goldsmith: That is a detailed question on which it is important to have a clear and precise answer. If the noble Baroness will permit, I will write to her about it rather than attempting to get an answer standing at the Dispatch Box.

Lord Campbell of Alloway: I am grateful to the noble and learned Lord, but the fundamental problem still arises to be faced. I understand his point of view, but to save time, I cannot do justice to my amendment until I have spoken to Amendments Nos. 32 and 35 to 37, which are concerned with Clauses 17 and 18. There I develop the arguments on which I rely and at this time do not wish to repeat. If the noble and learned Lord would understand and forgive me for not replying and acquit me of obduracy, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clauses 5 to 7 agreed to.
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6.30 p.m.

Baroness Noakes moved Amendment No. 22:

(1) The Treasury shall appoint a person to consider applications under this section.
(2) An application may be made under this section by any person who believes that an officer of Revenue and Customs is exercising a function or has exercised a function which is not in accordance with section 6 or 7.
(3) The Treasury may make regulations as to the way in which applications under this section may be made and how they are to be dealt with."

The noble Baroness said: We now come to the issue of the powers of the new Revenue and Customs. The integration is being undertaken at such speed that the Government have not taken the time to work out how Revenue and Customs will work in practice. They will be doing this following some form of consultation. I raised the issue of consultation at Second Reading and the noble and learned Lord told me:

Is the noble and learned Lord yet able to say when the consultation will emerge? I appreciate that only two weeks have elapsed since Second Reading. However, it is an important issue and, if he cannot say when it will happen, perhaps he will say a little more about what kind of consultation is being considered.

I hope that the Government are committed to a wide-ranging consultation allowing all potentially interested parties to debate the issues fully and in a reasonable timescale. I say that because I know that in another place the Paymaster General indicated that matters would be brought forward in the 2006 Finance Bill. While that sounds rather a long way away, given the potential complexity of drafting and some of the quite serious issues that arise in relation to whether the powers should be levelled up or levelled down, it is not that far away. Therefore, it is important to know what kind of consultation and what kind of timescale will be involved.

I am sure that the noble and learned Lord will agree that in a perfect world the powers of the new organisation would have been worked out before commencing the merger process. That is especially important as the powers themselves have a particularly powerful influence on the culture of the new organisation.

But, of course, we do not live in a perfect world and so the Government have introduced Clauses 6 and 7, which are intended to ensure that the existing powers are ring-fenced and capable of use only in the context in which they were originally created. We do not oppose that approach, but the issue remains of what happens if, say, an officer seeks to use his Customs and Excise powers for an Inland Revenue purpose.

This issue has been raised with us by the Institute of Chartered Accountants of Scotland, which has said that there are concerns about a transfer of powers by stealth. It refers in particular to the different access provisions currently enjoyed by the Inland Revenue and Customs and Excise.
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The examples that the Institute of Chartered Accountants of Scotland give are the powers under the PAYE regulations and for corporation tax under the Taxes Management Act, neither of which give rights of access to premises or powers to interview taxpayers. On the other hand, VAT inspectors can do those things. What happens if an enthusiastic VAT inspector decides to go on a fishing expedition for PAYE or corporation tax purposes using his access and interview powers? Does the taxpayer have any realistic method of ensuring that Revenue and Customs officers do not exceed the powers so painstakingly ring-fenced in Clauses 6 and 7?

I anticipate that the noble and learned Lord will say that the taxpayer retains the right to seek judicial review. If he does, I shall be watching very carefully to see whether he says it with a straight face. I am sure that, as a law officer, he will know that the remedy of judicial review is a very large sledgehammer to crack an often very small nut. It is an expensive process and it does not give accessible justice in normal circumstances—the circumstances of an ordinary taxpayer.

Similarly, an application to the Parliamentary Ombudsman may well be available but that is an extremely slow procedure for delivering a just solution, as anyone involved in the Equitable Life affair will be aware. The taxpayer needs a simple, purpose-built process to deal with the issue of powers that are being transferred and purportedly ring-fenced by Clauses 6 and 7 until the whole issue of the powers of the new body are put on to a proper statutory footing and it becomes much clearer.

I have drafted Amendment No. 22, which may not be a perfect amendment, to create a simple and effective appeals procedure to allow a taxpayer access to some simple form of justice if he feels that his rights are being infringed. The amendment states that the Treasury must appoint a person to consider applications about Clauses 6 and 7 powers. It is deliberately light touch, leaving the details to be provided by the Treasury in the way it thinks appropriate. We have drafted a regulation-making power to cover this so that arrangements can be changed as circumstances change.

The amendment says nothing about what happens if there is a finding against the Revenue and Customs. I am assuming that the Revenue and Customs would then put the matter right in whatever way was appropriate. Failing that, the taxpayer might then have to fall back on judicial review, but he would by then have a finding which would fortify his own position and case.

As I mentioned, this is not a perfect amendment in drafting terms. I hope that the noble and learned Lord will not attack it on that basis and will treat it as a probing amendment. But I do hope that the noble and learned Lord will recognise that it is a serious issue which has been raised and that it does need a serious response. I beg to move.

Lord Campbell of Alloway: I support the amendment in principle, really because every profession now has some means of challenge by
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anybody who wishes to challenge the conduct that he receives at the hands of those in the department and so on. I can see in this context every reason to support the amendment; not necessarily in the terms in which it is drafted. It is the spirit of the thing, and I think that the access should be there.

Lord Newby: The interest in the amendment is not so much the short-term problem in the way that the text of the amendment seeks to deal with the matter—that is, the period between now and the next stage of legislation—but that it foreshadows a really big issue which is coming down the track relating to powers.

One of the virtues of the merger, as set out by the Government, is that it will enable officers of the new merged department to deal with a company's entire tax problems. In theory, a single person will look at the income tax, PAYE, corporation tax, VAT and other matters dealt with by a company.

As long as there are differing powers relating to different taxes, there will be considerable scope for muddle, confusion and potential abuse. If I were to go into a company in this all-seeing tax officer mode and I wished to investigate a revenue problem that that company might have, but would like greater powers in which to do that than those I have wearing a Revenue hat, I might decide that it would be extremely helpful to wear a Customs and Excise hat—a VAT hat, if you like—to gain access or whatever. I think that this is potentially a big problem that we shall need to look at in greater detail, probably not with this Bill, but in the next Bill. It is worth pointing the issue out before consultation gets very much further. How will a multi-hatted tax officer segregate in his mind how he deals with one tax or another, in the context possibly of a single visit, when he has sole responsibility for a company?

I am not sure that this particular amendment is required in the short term, because I do not think that current officers of the Revenue or of Customs and Excise are likely to be exercising that broader responsibility in the short term. Given what the Minister said at Second Reading, I think that the noble Baroness has flagged up a potentially major long-term issue.

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