Finance Bill

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Dr. Pugh: Is it recorded that those small businesses also wanted mandatory e-mail filing?

Dawn Primarolo: What they want is clean data. The way to ensure that is to have the data transmitted to the Inland Revenue on time in forms that are acceptable. I would say to the hon. Gentleman that—[Interruption.] That is to ensure that the correct information is collected. It is a burden to ask for information that we do not require—we often receive such information—and businesses want to be able to develop.

Turning to the figures for businesses, the annual Department of Trade and Industry benchmarking study shows that the number of United Kingdom businesses connected to the internet rose from 90 to 94 per cent. during 2001. That is the highest connection rate in any G7 country. The 2001 benchmarking survey also shows that there has been a rapid increase, from 15 per cent. in 1999 to 62 per cent in 2001, in microbusinesses making use of the internet.

Mr. Bercow rose—

Dawn Primarolo: I shall give way in a moment, if the hon. Gentleman will allow me to finish my point.

The Government's objectives are to listen to businesses, to provide incentives to use an intermediary—an accountant—who files on the internet, to try to reduce the compliance costs for businesses and to make the change in a way that enables them to develop the technology so that they

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can grow. Those principles underpinned the review and that is what we are delivering in these provisions.

Mr. Bercow: I am sure that I am not alone in being underwhelmed by the Paymaster General's statistical litany. I want to ask her a question that I asked of another hon. Member earlier. If use of the net and e-filing are as popular as she supposes, why does e-filing have to be compulsory?

Dawn Primarolo: The Carter review demonstrated that it was necessary to provide an incentive for smaller employers to move to that position. The Government will invest £420 million to do that. If we are to invest the money and tell businesses that we will deliver the service with clean data, we must ensure that we reach that point, hence the requirement for PAYE for small businesses to be made by electronic filing by 2010.

I fully understand that there are exceptions, particularly in a small section of the community with deeply held views about internet use. I shall return to those specific points once I have made the general case and answered the questions about why e-filing will be compulsory for PAYE and for small and medium businesses.

Mr. Flight: The Paymaster General has made much of the £420 million investment. She said that the Government want tit for tat and that, if they put money in, they want everyone to be forced into e-filing. What does she mean by investment? I presume that she is saying that programmes will be put in place with a view to saving costs in the running of the Inland Revenue. That is not Government investment; it is merely part of the mechanics of collecting tax effectively.

The Chairman: Order. Before the hon. Lady responds, I want to clarify something in the light of her comment before the hon. Member for Arundel and South Downs intervened. I am curious about whether she will encroach on amendment No. 230.

Dawn Primarolo: Okay. I shall not do that. I apologise, Mr. Benton, but I know that some hon. Members, regardless of the amendments, are concerned about compulsion for everyone and want to know whether there will be exemptions. I shall respond to that point not under these amendments but under amendment No. 230. I wanted to notify the Committee of that, because the point has been behind many of the comments that have been made, particularly with reference to the Human Rights Act 1998 and whether the compulsion would be a breach of others' deeply held views, for which the 1998 Act provides.

In response to the hon. Member for Arundel and South Downs, the Government propose that payments start at £250 for 2004–05. We do not need to include that in the Bill, because we already have the power to pay the incentives. The payment is not for equipment but for the intermediary's bill. It is intended to facilitate the use of the intermediary by way of a direct subsidy to those who use it, so it reduces their costs, because they still have to do tax returns and pay an accountant if they use one. The payment tapers off

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during the five years to a final payment of £75 in 2008–09.

The software is not specified by the Inland Revenue. There are many different types of software and methods. There is constant change and communication with the Revenue, and that will grow. Therefore, we are not specifying which software must be used. It will be developed by the industry. I should have thought that the Opposition would encourage the Government to do that, rather than try to create their own. Therefore, it is a direct payment to the intermediary for the services provided, which we would expect to be passed on to the individual business. Small businesses said that that was what they wanted. Having consulted and listened to them, that is what we have provided.

Dr. Pugh: This is a significant point. The Paymaster General has just said that businesses can choose whatever software they want, yet subsection (2) states:

    ''Regulations under this section may make provision—

    (a) as to the electronic form to be taken by information delivered to the Inland Revenue using electronic communications''.

It appears that a power has been reserved to the Inland Revenue. If I have misunderstood, I would be happy to have clarification from the Paymaster General.

Dawn Primarolo: The hon. Gentleman has misunderstood the clause. On a day-to-day basis, the Inland Revenue discusses software development with software designers to ensure that the legal

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requirements of the tax system are met. The regulations and the Bill provide for the continuation of such discussions, which take place at present. The measure is not intended to be used in the way that the hon. Gentleman suggests. He probably knows well that software developments and the knowledge and expertise of the IT industry are expanding all the time. It is necessary to ensure that the software can be used to provide the information that the PAYE legislation obliges the employer to give when he makes the return. That is the purpose of the measure.

The Opposition are looking for ghosts, skeletons and reasons why the Government are taking this approach. If they examined the current practices of the tax system with regard to paper transactions, they would see that the measure translates those practices into electronic delivery of the same information. Basically, that is what is provided for and what is happening.

Amendment No. 231 would require that regulations made under the clause could not provide for a penalty to be charged if an employer did not comply with a requirement to send his return electronically. The regulations made under the powers will require employers to send certain returns electronically—

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.

The following Members attended the Committee:
Benton, Mr. Joe (Chairman)
Bercow, Mr.
Brennan, Kevin
Burnett, Mr.
Casale, Roger
Chope, Mr.
Cruddas, Jon
Cunningham, Mr. Jim
David, Mr.
Field, Mr. Mark
Flight, Mr.
Grayling, Chris
Harris, Mr. Tom
Healey, John
Hendrick, Mr.
Hoban, Mr.
Jack, Mr.
Kelly, Ruth
Luff, Mr.
Luke, Mr.
McKechin, Ann
Marris, Rob
Pond, Mr.
Primarolo, Dawn
Pugh, Dr.
Ryan, Joan
Smith, Angela
Southworth, Helen
Sutcliffe, Mr.
Wright, David

 
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