Examination of Witness (Questions 320
WEDNESDAY 22 MAY 2002
320. Just to clarify that point, are you saying
that we may end up with new a self-assessment form which is different
according to the class of taxpayer it is aimed at?
(Dawn Primarolo) Yes, that would be possible. It would
be like a standard form with an additional sheet for capital gains.
321. Standard, standard plus one and standard
(Dawn Primarolo) Yes. I am not suggesting for a minute
that what we would end up with would be a standard form of four
plus 20 pluses. The idea is to reduce the amount of information
and we already do that to a certain extent with some taxpayers
because we know from their previous returns that they will need
to fill in particular sections. That is how it should work. The
reason I hesitate is because I do not want to make it sound as
though we would just replace it with different complexity. The
pressure has to be that we personalise the forms where we can
and get the information which is relevant from taxpayers. That
means we have to have a better understanding ourselves of who
those taxpayers are.
322. Referring back to work which has been done
in the Department for Work and Pensions, where once people have
established a set of questions and answers, in this case to get
money from benefits and in the case of taxation to pay some in
or not, is there not some scope for looking, once you have established
your basis of paying tax, at the same system, that the Revenue
sends out a statement, this is what it is, clarify, yes or no
and end it there? If it is the same as last year end of story.
(Dawn Primarolo) Yes; for where taxpayers' affairs
have not changed. If their affairs are so static, in the sense
that the information does not particularly make a big difference,
then why have them doing that at all? Why not remove them from
the system? That is really what we need to try to get towards.
We collect something like £17 billion through self-assessment
returns; that is a lot of money. As we change the system, we do
not want suddenly to have explain to the Chancellor that we have
got a simpler system but we are a few billion down.
323. That is out of how many taxpayers? Is it
(Dawn Primarolo) Approximately nine million; it varies
324. I am a fan of the system, possibly the
only fan of the system. I have always found it very flexible and
I get exactly the forms I want magically. I did have one practical
point. When people pay too much tax they have to write in specifically
to say they want it back. Would it not be a nice procedure if
it were automatically deducted in the tax code next year or they
automatically received interest or simply automatically received
(Dawn Primarolo) We repay automatically. If I might
just indulge in a little further speculation, I would consider
it a huge step forward for the Revenue if, when a taxpayer contacted
us for whatever reason, having answered their query, we could
then say, would you like us just to check that you are entitled
to all the reliefs you are getting or what reliefs you are entitled
to and that you are paying the right amount of tax? We have a
lot of work to do and it can start here in getting to the position
where taxpayers feel confident enough to ask us to do that. At
the moment they would be feeling that maybe we might find they
owed us some tax, whereas it is the case that we should be able
to offer that facility in the longer term. I hope with our call
centres, with the contact points, with the way we provide for
people to contact us that we will be able to do that, but wherever
possible the repayment should be automatic.
325. In my particular case I did have an overpayment
which sat there for two years until I asked them about it and
they said they would pay it back if I liked but I had to write
a letter asking for it.
(Dawn Primarolo) This is always the problem. It is
like going to a party when people ask me what I do and I say I
am a Minister. They ask which Department and I say Treasury and
Inland Revenue and then they start asking me about their self-assessment
return. We have 21 million on PAYE and nine million on self-assessment.
I could not promise that we do not make errors. I am very sorry.
We will try not to do it again. I am sure your file will be flagged
to make sure we pay it immediately and yours as well, Chairman.
326. I shall not ask you for any tax advice,
Minister. I would point out, however, that Nick Palmer can no
doubt fill in the forms without any trouble, but he does have
a PhD in mathematics and maybe that helps. I am sure you have
been asked this before at parties. Do you fill in your own form?
(Dawn Primarolo) No, I do not.
327. Do you think you could come close to doing
(Dawn Primarolo) I should be able to do it. One of
the things we need to work through is understanding why some people
use agents and some do not. My personal preference, particularly
as an MP, is to use one because the security of knowing somebody
else has checked everything I have done is important to me. Yes,
I should be able to do it myself. I would also admit, before you
ask me, that trying to do it on the internet last year was not
something that I succeeded with. That is of course a legitimate
question and the acid test if I cannot do it myself. Fortunately
for me something like 50 per cent of the taxpayers in self-assessment
do manage to do it, so they obviously have PhDs in mathematics
328. When you are looking at budget starters
do you have a specific role in saying, "Hey, hang on a moment.
This might be a very good idea but it is going to be a nightmare
for the form filling?". In other words, how much is the compliance
burden side of the whole tax-making function given weight in the
decision-making process? I ask that because there is not a single
person who knows anything about it who would say that life has
got easier in terms of objective complexity of the tax system
over the last five years. It is much more complicated and much
more difficult to handle than it was five years ago. You mentioned
a key area: CGT. You said you would have to send an extra form
for CGT. CGT is now a nightmare.
(Dawn Primarolo) It was not exactly easy on indexation,
329. It is worse now. In the battle between
the people who want to reduce the compliance burden and those
who have their pet schemes, who is winning?
(Dawn Primarolo) I shall leave you to make your judgement.
You may come to a slightly different judgement from me. Yes, of
course and part of the process that we go through, through the
starter process, is to look at compliance costs, fairness, whether
there is truly simplification, whether it is in tax law rewriting
or whether it is simplifying the system, certainty and the world
becomes more complex. I was fortunate enough to have a few days'
break in the US as they were beginning their run-up to their tax
returns; every single person does a return there. Their cry as
well was in every publication that the system was more complex,
life was more complex, tax system was more complex. It is a balance
between fairnessand we could discuss the CGT reformscompliance
and simplicity and that obviously cuts both ways, for the Inland
Revenue and for the taxpayer.
330. Is simplicity and ease of compliance top
of the Chancellor's agenda?
(Dawn Primarolo) They have to be balanced with fairness
and the objectives of the system. It would be completely wrong
for me to say that our first objective is simplicity. Our first
objective is fairness, supported by simplicity and compliance.
331. You have said you want to reduce this burden
in two ways: you want to make the forms shorter and you want to
get some people out of self-assessment who are in it at the moment.
Do you think there are some advantages to having people in self-assessment
in that they become more aware of the amount of tax they pay?
(Dawn Primarolo) What is interesting about the self-assessment
system is that when we were elected in 1997 all the decisions
about the system had been taken and we were on the run-up to implementation.
I do have to say that it has been very successful in bringing
in the tax and that is a benefit. The obligation is that yes,
of course people must see the tax that they are paying and why.
So trying now, with the system which is basically working, to
continue to improve it is a challenge, I would not deny that.
332. The question is whether you think it is
good that people should know how much tax they pay and do you
think that self-assessment makes a contribution to that?
(Dawn Primarolo) It does make a contribution for those
taxpayers. It is writ large for them and the basic proposition
is true for all taxpayers.
333. So there would be a loss if you reduced
those in self-assessment.
(Dawn Primarolo) A loss?
334. Of awareness.
(Dawn Primarolo) This is about the explanations and
the responsibilities, the information that Revenue provides and
a balance. You are adding another criterion here to the balance
between making sure that the taxpayer interacting with the system
is fair and transparent but not over burdensome. We could write
huge amounts to them, which they might not want, in terms of explaining
the levels of tax. There is bound to be a trade-off here between
how much information we require from people and therefore how
they then connect that to their appreciation or not of how much
tax they are paying.
335. During the evidence we have been told that
about 45 per cent of the returns are filed before the September
deadline and about 45 per cent before the January deadline and
then ten per cent drift on until July. It means the Inland Revenue
has a work load which is in two big lumps, two big piles of returns,
which internally cannot be the most efficient arrangement. What
stops this being evened out during the year so we have people
whose name begins with A and B during January and D and E in February
and so on?
(Dawn Primarolo) The obligation is within the fixed
tax year. You are quite right that particularly coming up to the
January deadline we see a huge surge into the system of returns.
I cannot remember the exact figure but we get 1.5 million within
about two weeks. Our obligation is to make sure that that is dealt
with and the pressure that puts on the system is very great. One
of the things I still feel we do not have enough information or
understanding on is why more people do not use the advantage of
submitting by the September date when the Revenue does all the
work for them, that is a huge bonus in the system, and how we
can try to increase that number. Up until then there is a flow,
though there is a bit of a surge round the September date, and
then why there is this slowing down until we really start approaching
the January date. We won an award last year for our commercial
reminders, not for the best of reasons: it was because they did
not like it. They did not like Mrs Doyle going "Go on, go
on", but everybody knew because they did not like it. How
can we remind people? It is not the best of compliments, is it,
but at least they know? One of the things we have looked at is
telephoning people and that is delicate. We do not want to make
it look as though we are pressurising them, but reminding them
that we still have not had their return, that we are approaching
deadlines, why do they not put it in now and discussions with
agents will certainly help us understand that, where agents are
putting in. The problem is that wherever you have a deadline there
are always those who want to wait until they are close to the
deadline and it puts pressure on the system. It comes back to
the communication point. What is a sensitive balance of reminding
people without making it look as though you are harassing them?
336. You could always have a moving deadline:
the deadline for the As and Bs in January could be one thing and
the deadline for the Cs and Ds in February would be another.
(Dawn Primarolo) That would be unfair to taxpayers
because taxpayers have a tax liability which they are obligated
for for a certain period and they have to have paid their tax
by that period. If by some mechanism we allow some taxpayers to
have a longer period to make their returns, the taxpayers who
have a shorter period than that would quite rightly point to a
fairness issue on that point. The other problem we have is that
it is not just a question of people paying. People pay enough
tax to have the tax paid by the deadline but do not submit their
returns necessarily on time which is crucial for us to know whether
or not they have paid the right amount of tax. The tax year and
therefore the deadline, becomes immovable. What we need to do
is look within that about how we can perhaps try to encourage
people to not wait until the last minute, but in the end that
is the taxpayer's choice and that is the deadline which is in
337. One of the things which induces people
to file as late as possible is the fear that if they file early
they are leaving more chance of being enquired into. All the evidence
is that that is not true but what can be done to convince them
(Dawn Primarolo) It is not true but this raises all
the areas around how our enquiry system works and the publicity
which we can give running up to the deadlines to make it clear
that it does not make any difference in terms of enquiries. Some
of your witnesses certainly raise that as an issue. I shall not
go into that now; maybe there will be other questions on the enquiry
system. If we look at the work we are doing with the agents and
as we develop that I hope that we will be able then to address
the point you are making better. In the end I think we will still
find ourselves with that peak as we reach the final deadline.
338. One of the ways of simplifying things or
helping filing has been the internet filing. The figures indicate
that 39,000 people used the service in the first year and in the
second year it was 75,000 out of nine million. Why is it so unpopular?
Who is it designed for? Is it designed for agents to use or is
it designed for individuals to use? Some of us had a session in
Ireland last week. They are planning on 20 per cent use of the
(Dawn Primarolo) The internet is designed for the
use of individuals and there is an electronic lodgement system
through subscription with 350,000 on it. I agree the figures are
(Dawn Primarolo) I was going to use more tactful language
than that though - disappointing would be fair. When we look at
the Australian experience and when they started to move into this
area, the initial years were as disappointing for them as ours
were here. This year the figures are moving up but again it is
well knownit is no good me pretending otherwisethat
the development of the facility in terms of making it easier to
use is something we need to continue to work on. Given that some
members of the Committee have had the opportunity of looking at
the Irish experience I should be more than happy to provide for
the Committee a briefing and a demonstration of the type of products,
how this system is being developed and how we see it evolving
both in its attractiveness, user friendliness and, if the Committee
would find that helpful, it would go some way towards showing
what it is we are trying to address and over what time period
we hope to do that. It is in the very early stages but we could
demonstrate to the Committee our portal for corporation tax as
well and the sort of ways we are trying to develop that system
now so that you could have an early viewing and we should be delighted
to receive your comments on that.