Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 240 - 259)



  240. I understand that.
  (Mr Hartnett) We will make estimated assessments on the best basis we can from what we know about the individual having investigated him.

  241. And how often have you done that?
  (Mr Hartnett) With drug dealers?

  242. Yes.
  (Mr Hartnett) When we know that someone is a drug dealer and we can show that it amounts to trading activity we tax it.

  243. How do you know? You have put a bit of work into ghosts and casual moonlighters, have you put the same effort into work on drug dealers?
  (Mr Hartnett) That is really for Customs and Excise principally.

  244. You are before us now and we are talking about the income of these people. There are other offences being committed, I understand, but I am asking you specifically about paying their fair share of income tax.
  (Mr Hartnett) If I go back to what I was saying to Mr Jenkins earlier on, if we target an area, for example, and find there are people with wealth that we do not understand the source of we will investigate and try and establish the source of that wealth.

  245. I understand that. So if you see somebody with big cars, a big house, you know they are selling drugs, what then happens?
  (Mr Hartnett) But it is very rare for us to know that.

  246. The dogs on the street know it in a number of my areas, the police will be able to tell you who is selling drugs in the area. They have difficulty in catching them, and I accept that, but I am seeking to clarify what action do you take in these circumstances of people who have got unexplained sources of income?
  (Mr Hartnett) I do not think I can really add to what I have said, other than to say that we will try and establish a source. If it is a source within the tax system, such as trading, such as gains, we will tax it.

  247. Can you clarify for me how many cases of people trading in drugs you have actually pursued over the last year or so?
  (Mr Hartnett) I am sorry, I do not have that information.

  248. Maybe you could let us have that information later?
  (Sir Nicholas Montagu) Those are data that we do not have.

  249. So you do not know how many drug pushers you pursue for tax?
  (Sir Nicholas Montagu) Not in that form, no.

  250. What form might you have it in?
  (Sir Nicholas Montagu) I do not know. We might have some form of data about people with unexplained sources of income and what we have taken by way of tax. What we would not have is "X is a drug dealer, we did him for £10,000".

  251. Okay. Can I just clarify then the question of penalties. I am not clear about the point of confiscation because you mentioned that you could charge a maximum of 100 per cent of the amount to which people put their hands up and interest.
  (Sir Nicholas Montagu) Yes.

  252. Where does confiscation come into it?
  (Sir Nicholas Montagu) If our attempts to enforce a debt have failed we can then distrain.

  253. You have not confiscated any restaurants then?
  (Sir Nicholas Montagu) No.

  254. If they have paid up 100 per cent you do not have any confiscation?
  (Mr Hartnett) If we have prosecuted someone who happens to be a restaurateur then we will look to see whether a judge will authorise confiscation of assets.

  255. So it will only be done by the agreement of a judge and only after prosecution?
  (Sir Nicholas Montagu) In a criminal case. In a civil case we will enforce to the point of distraint in appropriate cases.

  256. But if somebody puts up their hands and hands you the money then there will be no question of confiscation?
  (Sir Nicholas Montagu) No.

  257. I just wanted to clarify that point.
  (Mr Hartnett) Could I go back on drugs because I want to make one very quick point, if I may. There are Government proposals for something that has been called the Criminal Assets Recovery Agency which will target in particular the sort of characters you mentioned. The proposals involve that agency having some tax powers as last resort.

  258. I am aware of that, I am just wondering what powers you generally have. Can I finally ask a point about targets. You have mentioned on a couple of occasions that you have not got a cash target for recovery of this, that and the other. I am talking in the context of identifying taxpayers. Would it not be more helpful to the state as a whole in terms of the amount of money that was collected if you were maximising your efforts on amounts of tax rather than the number of individuals who are being pursued? Throughout today, having listened to what you have said to my colleagues, I do very much get the impression that because it is easier in many ways to catch ghosts or moonlighters than it is to catch people who are evading much larger sums then it is the smaller people you go for.
  (Sir Nicholas Montagu) I do not think that is right at all, Mr Davidson. The answer is no. Dave has mentioned the Special Compliance Office, they specialise in the large evaders. We have had some publicised cases. The reason why I am against targeting yield is what we are after is the right amount of tax from the right people. If you target yield, as other fiscal authorities have found, it can encourage inappropriate behaviour. We forecast yield and if yield achieved was at odds with forecast then Stephen and his fellow directors would want to look at the office to find out why.

Mr Williams

  259. It is a pleasure as always to listen to you, Sir Nick.
  (Sir Nicholas Montagu) And indeed to be questioned by you. Save the best until last, Mr Williams.

  Mr Steinberg: Thank you very much.

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