Examination of Witnesses (Questions 140
MONDAY 22 OCTOBER 2001
MONTAGU KCB, MR
140. Okay. Let us just move on from there, although
still keeping round the same topic of people not actually complying.
In paragraph 3.11 on the same page it tells us that the Inland
Revenue have a priority of pursuing large debts rather than outstanding
returns and, therefore, the backlog is actually accumulating.
What is the actual backlog at the present time?
(Sir Nicholas Montagu) I will give Stephen a moment
to find the numbers, if I may.
141. What is the backlog? What are you going
to do to reduce that backlog?
(Sir Nicholas Montagu) What we are going to do is
we are going to collect 40 per cent of the old returns between
May 2001 and March 2002 and we are already well on the way. In
other words, we are tidying up. Yes, there was a backlog, and
again it goes back to many of my other answers. For the future,
what we want to do is to preempt and avoid backlogs through things
like the Taxpayer Filing Initiative that I have mentioned. Stephen,
would you like to give Mr Steinberg some figures.
(Mr Banyard) That is right. What we have got is targets
in the future so that for the current year we get in 90.5 per
cent this year but then year on year improvements. The target
for those which are one year late will be 96½ per cent and
we will target to increase that. Then to sweep up the backlog
we are trying to collect 40 per cent of those in this year and
we are on course to do that, and to get the remainder next year.
142. The question I would ask here is you go
after the big debts, would it not be more beneficial to go after
the backlog rather than big debts? In other words, how do you
know that in the backlog there are not huge debts?
(Sir Nicholas Montagu) Again, intelligence reports.
They are not foolproof but we are constantly and iteratively analysing
the reports. It shows that the people who file on time tend to
have the bigger debts. As I say, it is not an absolute but as
a generalisation late filers have smaller debts.
143. I have just about run out of time but there
is one question I really want to ask. A lot of people have actually
asked me this, it sort of continues the question. My understanding
is that you check at random on every thousand or so people, whatever
it is, who have already filed their forms in.
(Sir Nicholas Montagu) Yes.
144. Are you aware that it costs people to respond
to that random check?
(Sir Nicholas Montagu) Yes, in the sense that obviously
they will need to devote time or they may use an agent to do so.
What we try to do is again to keep the hassle to a minimum, not
to prolong enquiries
145. Okay, you have answered the question, it
does cost them. Is that not damn well unfair on somebody who has
complied, who is probably and possibly paying exactly the right
tax to then have to pay out to either an agent or whatever to
get that information and at the end of the day they are out of
pocket? If those persons are found to have put in a correct tax
form why should you not refund them for any expenses that they
(Sir Nicholas Montagu) Because, Mr Steinberg, the
random checks are an essential part of our routine checking to
make sure that we are targeting the right people and they critically
inform the kind of risk, intelligence and analysis that we have
been talking about. The design of the checks was specifically
approved by Parliament and we only reimburse the expenses incurred
by taxpayers for tax agents in cases where they were caused by
our error. Without random checks our intelligence would be the
poorer. Of course businesses can offset the costs of their fees
to tax agents against their tax liabilities.
146. Can I just ask one final question. It is
a bit of a bugger though, is it not, that somebody who has complied
and has done everything right finds themselves having to pay out
extra because you have randomly caught them and there are other
buggers not paying their tax who are getting away with it and
the penalties are so small that it does not matter if they do?
(Sir Nicholas Montagu) Mr Steinberg, it is not for
me to say whether a design approved by Parliament is a bit of
a bugger or not.
147. I think we are almost on the last lap so
I shall sweep up on some issues to do with compliance work and
random selection. We have just heard that you use one per thousand
cases at random
(Sir Nicholas Montagu) Sorry, did you say one thousand?
148. One per thousand. It does seem to me that
both the management information systems, which you have already
acknowledged were weak, and the management itself has also been
lacking to some extent in that process. I just want to take you
through a number of points in the report. The first is in the
first year we have figures that you under-achieved your target
by 50 per cent in terms of the number of cases you wanted to open.
(Sir Nicholas Montagu) Which paragraph are you looking
at, Mr Trickett?
149. I am on table 13 on page 19.
(Sir Nicholas Montagu) Right.
150. In a way I thought these figures would
probably be imprinted on your heart as well as in your mind. You
will see that you failed by 300,000 cases in that particular year.
Can you see where I am, first of all?
(Sir Nicholas Montagu) Yes.
151. I am on the NAO Report, page 19, table
13, the total figures. It seems you targeted 619,000 cases but
only dealt with 308,000.
(Sir Nicholas Montagu) Yes.
(Sir Nicholas Montagu) Stephen, would you like to
(Mr Banyard) I think two answers to that. One is that
was our first year, I believe, with that set of targets and we
were not sure with the non business enquiries precisely how many
we could do with the people that we had got, how many we could
accomplish. The second thing is that the non business enquiries
are relatively focussed enquiries where we go in and look at particular
points. For example, the resource per enquiry is much less than
the top column which is the "business full" enquiries
where we look much more closely at the business records. It was
a case of getting used to the new targeting system and on that
one we got it wrong.
153. Was the 619,000 one per thousand or is
the new figure which you halved almost, 385,000 one per thousand
(Mr Banyard) Sorry?
(Sir Nicholas Montagu) These are not the random enquiries.
154. I am misreading it. Perhaps you could explain
what this table indicates?
(Mr Banyard) Yes. This table is our targets for take
up of cases each year. Under "business full", for example,
in 1999-2000 we target to look at 44,145 businesses.
155. So I see. This table is introduced by paragraph
4.9 which presumably you have agreed and that refers to compliance
enquiries which fall into three categories. You have massively
failed or else massively over-estimated your capacity to do work.
What proportion of your total case load fell into the 619,000?
If you do not know that is as good an answer as that you do know
(Mr Banyard) I will try and answer it. What we are
looking at is a certain proportion of the businesses where we
are looking at them very fully indeed and we are looking at their
records, and that is the top line. The second line is where we
are looking at businesses but certain particular aspects of the
business where we are not going in and looking at all the records
but we are saying these particular areas are at risk.
156. I understand that but you are not answering
the question I was asking. I want to move on to another question
which is in the following year you over-achieved your targets
because presumably you estimated lower and actually achieved more
than you had intended to. Now in the footnote I see that this
does not mean you completed these cases, these are the cases which
you opened and a large number of which presumably rambled on for
some months or possibly even for some years to come. Can you indicate
to us how many were completed in that year?
(Mr Banyard) Broadly we would complete the same number
that we opened because we do not want to start building up cases.
I can give you the average in lapsed time. We would normally spend
about ten to 12 months on average on one of these cases.
157. Is there any double counting between the
(Mr Banyard) No.
158. How did you over achieve then? You simply
did more cases than you intended?
(Mr Banyard) Our people were able to do more cases
than we originally targeted for.
159. I want to just go on then to follow the
logic through of this paragraph and see what actually happened.
In paragraph 4.10 we see that the local office compliance plans
and targets which they were given were actually not related to
the population size or the number of taxable points which were
within that geographic area or sectoral area but was related to
the resources within the Department. I think that is what paragraph
4.10 is saying partly. We have already heard that the South East
of England, particularly London, were under-resourced and maybe
still are. Are you able to say what the kind of differences are
in the compliance plans and targets between different local offices?
(Mr Banyard) We try and target risk as far as we can.
We look at the cases or taxpayers we have got in an area and we
score them and then we allocate staff to them, so we allocate
staff to compliance risk as far as we can. If we find that in
any area we have not got the staff to do that and there is a significant
difference then we can move cases from one area to another. For
example, we have moved cases from the southern end of Hertfordshire
and had them worked by inspectors in Norfolk.