Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 320 - 339)



  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 plus two.
  (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 nine million?
  (Dawn Primarolo) Approximately nine million; it varies slightly.

Dr Palmer

  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 a cheque?
  (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.

Mr Tyrie

  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 it?
  (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 as well.

  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, was it?

  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 fairness—and we could discuss the CGT reforms—compliance 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.

Mr Beard

  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 the system.

  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 otherwise?
  (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 internet.
  (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 —


  339. Miserable.
  (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 known—it is no good me pretending otherwise—that 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.

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