Examination of Witnesses (Questions 220
MONDAY 22 OCTOBER 2001
MONTAGU KCB, MR
220. In extreme cases. There are some situations
where people are working without paying tax and so on in fairly
substantial amounts. Is it possible to give us a note of the scale
of cases you take to prosecution?
(Mr Hartnett) We can certainly let you have a note
but we are a selective prosecution authority so we will not prosecute
every case irrespective of size.
221. I want a feel for the level at which you
decide to actually prosecute. We spoke about the Benefits Agency
and co-ordination of information and mention has been made of
Housing Benefits. Are there any other sources of information held
by the system that it would be helpful for you to have access
to which you presently do not?
(Sir Nicholas Montagu) I think that puts me in a slightly
difficult situation, Mr Davidson. At one level obviously the widest
possible selection of data that could be relevant, and it could
be an enormous range of data
222. Could you give me particular examples?
(Sir Nicholas Montagu) A wide range of information
about people's financial circumstances but, again, I have to give
the boring answer.
(Sir Nicholas Montagu) Let me get it on to the record.
The extent to which our powers to exchange information are extended
is a matter for Parliament because we can only do so by legislated
224. I do understand that but were Parliament
to give you additional powers and give you power to pick one of
three, what would your first choice be?
(Sir Nicholas Montagu) I do not think I am going to
answer that one, Mr Davidson.
225. Can I ask about interest payments, dividends
and the like which many people on PAYE will be forced to declare.
Are you satisfied that you have sufficient information supplied
from the providers of those payments to clarify whether or not
tax is due?
(Sir Nicholas Montagu) Yes, we are.
226. That is presumably for UK based providers
of dividend income and so on. What about people in the Isle of
Man, Guernsey, Jersey and the like?
(Sir Nicholas Montagu) I should make clear that when
I said "yes" I was talking about bank and building society
interest, I was not talking about dividend information.
227. So the dividend information you are not
(Mr Hartnett) Perhaps I can help, Mr Davidson. We
do, with the co-operation and collaboration of a number of companies,
test dividend information and we have not in the past found that
a significant source of non-compliance at all.
228. That is helpful. I want to use the example
of the restaurants that is on page 11 that is quite helpful. Like
one of my colleagues I found it very surprising that there were
only 41 cases and the amount collected from each was only about
£54,000 because presumably there must have been issues here
of evading profit, the PAYE to be collected on staff involved,
issues of VAT to be collected. I find it very surprising that
the amount there is so small. Could you clarify why that is and
also clarify the scale of penalties that is involved in circumstances
(Sir Nicholas Montagu) I have to say, Mr Davidson,
I think an extra yield of £700,000, expected to rise by a
further £1.3 million, strikes me as quite large.
It is true obviously that not all our enquiries are going to end
with a large tax yield. Take, for example, example seven on that
same page, this was a worthwhile investigation.
229. I want to stick with this, if I can, please.
(Sir Nicholas Montagu) I do not regard this as a low
230. Forty-one restaurants throughout the whole
of the United Kingdom is a very small number to be inspected.
I can see your staff behind shaking their heads so presumably
that is wrong. The figure of £54,000 per head seems to me
to be a small amount. Can you clarify what range of penalties
there are in these circumstances of the restauranteurs?
(Mr Hartnett) The penalty will be up to 100 per cent
of the tax evaded and, of course, there is an interest charge
231. As well as the tax evaded?
(Mr Hartnett) Yes.
232. So there will be tax evaded and an interest
charge of 100 per cent.
(Sir Nicholas Montagu) Up to 100 per cent.
233. Why do you not take 100 per cent?
(Sir Nicholas Montagu) Because we mitigate penaltiesthis
is a familiar theme that I have explored with the Committeefor
things like disclosure, co-operation, gravity. We have more interest
in getting it right and getting people on to the right track for
234. In terms of the amounts of tax evaded by
restaurants, presumably they will only put their hands up to what
they are pretty certain you can prove anyway, so there is no certainty
on your part that you have got them for the full amount that they
are defrauding the system?
(Mr Hartnett) I think the answer to that, Mr Davidson,
is if it is a cash business no-one could ever be certain but our
investigators are persistent and determined, always courteous
of course, and seek to get as close to the truth as they actually
235. Can you clarify how many restaurant cases
there are across the United Kingdom in pursuit?
(Sir Nicholas Montagu) We do not have that information.
236. And the average amount of tax collected.
(Sir Nicholas Montagu) I do not think we would have
information in that form.
237. These are cases where there are special
investigations of restaurants and you cannot tell me.
(Sir Nicholas Montagu) I am corrected. I thought we
did not have it in that form but we have and we can certainly
let the Committee have a note on that.
238. Can I just clarify the question of drug
dealing that was mentioned earlier on and the issue of unexplained
sources of income. There are a number of individuals in my constituency
and round about who have unexplained sources of income which everybody
knows is coming from drug dealing. Can you just clarify for me
whether or not these are people that you would be able to pursue
for non-payment of tax?
(Mr Hartnett) The answer to that, Mr Davidson, is
it depends whether there is an activity taking place that is within
the scope of the tax. What we would look for is where the money
has come from, whether it is trade, employment, whether it is
investment, a chargeable gain.
239. A trade in drugs then, people going up,
taking it, putting money in and going away with it?
(Mr Hartnett) It is very rare for anyone to say to
us "I trade in drugs".
15 Ev, Appendix 1, p29. Back
Note by witness: These cases (C&AG Report HC56) were
part of a particular project and not the number of restaurants
looked at nationally. Ev, Appendix 1, p30 and also Q 237. Back
Ev, Appendix 1, p30. Back