Examination of Witnesses (Questions 200
MONDAY 22 OCTOBER 2001
MONTAGU KCB, MR
200. It would be nice to think that you could
do it without that.
(Sir Nicholas Montagu) I do not think we said that
it needed to be changed, we said it is up to you, Mr Rendel.
201. It is us who needs to decide if it is going
to be changed?
(Sir Nicholas Montagu) Exactly so. I could not have
put it better.
202. What proportion of the late payers are
bankrupted before they pay up?
(Sir Nicholas Montagu) I do not think we have any
idea of that. I do not think we even have the information. It
would be an extremely small proportion.
203. What rules are there for those who do always
pay up and you have never found any mistakes?
(Sir Nicholas Montagu) Unless they are selected for
random enquiry they get no hassle from us. That is the essence
of the enabling part of our function. Most people want minimal
contact with us and if they get it right they do not get any hassle
204. If they have apparently got it right every
time and gone through all the calculations, which is quite a lot
of work, I know myself, most of us have gone through this, if
they go through it all and they do it correctly are they less
likely to be selected for enquiry afterwards?
(Sir Nicholas Montagu) No, because the essence of
a random enquiry is that it is exactly that. I mentioned in my
reply to the Chairman my visit to Singapore, I am afraid I do
not have the powers of my opposite number there to give inducements
to early filers.
(Sir Nicholas Montagu) You would not expect me to
comment on that either, Mr Rendel.
206. It might help one or two people to be rather
more honest and rather more quick in returning their replies if
they knew that they were less likely to have to employ an accountant
next year and go through with you a full review of that form.
(Sir Nicholas Montagu) As I say, the design of random
enquiries is not something within our gift.
207. How much unpaid income tax in your view
is due from people who are not self-employed but who have numerous
different paid employments? More than one paid employment.
(Sir Nicholas Montagu) I am sorry to be unhelpful,
Mr Rendel, but you are talking essentially about moonlighters.
We do not know. If we knew we would collect any unpaid tax due.
It goes back to Lord Grabiner's point about the impossibility
of establishing the size of the hidden economy. It also goes back
to our wish to get a better handle on it and, therefore, are setting
targets for our risk, intelligence and analysis teams to detect
ghosts and moonlighters.
208. Let me ask you one final question. There
are two groups of people in society whose work is currently illegal,
or if not illegal certainly marginal, and who are under consideration
whether their work should actually be made legal or not. Those
are those who sell soft drugs and those involved in prostitution.
Do you have any ideathis is part of the argument in these
caseshow much tax would be collected from such people?
It is important that we know what the potential is. Do you have
any idea of the potential for income tax collection from those
(Mr Hartnett) None whatever, Mr Rendel. The key thing
to hang on to here is that there is tax on trading and, for example,
it is not at all unusual in criminal courts close to juries coming
in with their verdicts, for the judge to ask a member of the Inland
Revenue to come and consider at that point whether there should
be a confiscation order or anything like that. Quantification,
I cannot help you, I am afraid, we simply do not have the information.
209. So you do not know how much you have collected
either from drug dealers or prostitutes in the past?
(Mr Hartnett) No.
210. Even after the courts have brought it to
(Mr Hartnett) Those are particular cases. We do not
maintain a record of what we collect in tax and national insurance
contribution from any particular trade. What we would be looking
for in those circumstances would be to see whether there was a
trading activity and to tax it appropriately.
211. I imagine there are very few people who
openly admit to you that they are drug dealers. Are there any
prostitutes who admit that is their form of earning a living?
(Mr Hartnett) I believe there are, yes.
212. Do you have any idea how much that is?
(Mr Hartnett) No, I am sorry.
213. I wonder if I can start off following from
paragraph 2.8 about the recovery of 21.8 million that is mentioned
there. Could you give me a feel for the spread of that? Is that
£21 from each of a million people or is it one payment of
(Sir Nicholas Montagu) I am not aware, Mr Davidson,
that we have any finer breakdown than the one recorded by the
Comptroller and Auditor General.
214. I will come on to that later. That is helpful.
I want to pick up the point about deterrents, particularly of
fraud. It seems to me there are two aspects, one is detection
and the other is penalties. On the question of ghosts, casual
moonlighters and so on, it seems to me that there are two elements
to this because Benefits Agency people are pursuing these folk
as well. To what degree is there co-operation and co-ordination
between the agencies in order to avoid overlap and duplication?
(Sir Nicholas Montagu) To the fullest extent that
our powers allow. We make full use of such powers as we have to
exchange information with the Benefits Agency.
215. Is there joint planning?
(Mr Banyard) In some areas there is local joint planning,
216. Is that geographical areas or subject areas?
(Mr Banyard) Geographical areas.
217. So you would not all sit down and say "construction
and taxi drivers are areas we want to look at, we will go ahead
(Mr Hartnett) An example, Mr Davidson, of exactly
that approach would be gang masters in farming where that is exactly
what we do do, and with other agencies as well, Customs for example.
(Sir Nicholas Montagu) The other example that is a
good one is I mentioned earlier the Joint Shadow Economy Teams
where we work jointly with Customs. They too would make use of
exactly the kind of information that you are talking about.
218. Can I ask about action against employers.
I have an interest in construction and we have had correspondence
on that and I will be coming back to that later on. Clearly people
who are ghosting or moonlighting on construction sites are doing
it with the knowledge and connivance of employers in many cases,
it is not just the individual. What action is then taken against
(Sir Nicholas Montagu) I will get Dave to give you
a detailed answer. Again, as you will know from our previous exchanges,
it was precisely that kind of abuse that the Construction Industry
Scheme was brought in to counter.
219. Sorry. The abuse we have discussed before
is the question of whether or not somebody should be on PAYE or
self-employed. What I am now talking about is people who are ghosting
and who are therefore working on construction sites and not paying
anything at all, so it is not an issue of which category they
fall into. They are clearly doing that in a lot of cases with
the full knowledge and consent of those who are responsible for
running the site. What action is taken?
(Mr Hartnett) Our approach is like this, Mr Davidson.
We audit, we simply check, the payments which employers in those
circumstances, main contractors, make to their sub-contractors.
We do not simply look to check that the sub-contractors we know
about are the ones they are making payments to, we will have a
look at their cash books and other records to see who is getting
the money. If the money is going to people who are not within
the Construction Industry Scheme and they are sub-contractors
then there are offences for which we can take penalties and in
extreme cases we will prosecute in those circumstances.
14 Ev, Appendix 1, p29. Back