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Mr. O'Brien: I thank the Minister for laying out a helpful introduction to clauses 24 to 41, which is appropriate as clause 24 is the introductory clause of part 3. That has helped to clarify several points, and it is particularly helpful to have a report on how the consultation process has been engaged.
As was described, the general background to the clause, and the others in part 3, is the wish to bring civil penalties for the evasion of Customs duties as an alternative to criminal sanctions. My party regards it as sensible to approve of a step that provides for civil penalties to increase compliance with the rules rather than leaving criminal sanctions as the only option. That sets the scene for where we are coming from in relation to clauses 24 to 41. Notwithstanding the welcome for the civil regime, the test that I have applied in preparation for the debate is how the clause shifts the burden on the taxpayer. Has the burden been shifted in such a way as to be onerous in a way that raises questions or cannot be sustained? We have tested the possible fairness or the burden of the provision.
The Institute of Chartered Accountants in England and Wales is well aware of the problems faced by Customs and Excise in the management and control of certain movements of goods, and it understands the logic behind the introduction of the provisions. It is concerned about the way in which the clauses have been drafted and about whether the proposals meet the requirements of human rights legislation. To that end, we need to explore some of the issues. I note that the frontispiece of the Bill states:
''Mr. Chancellor of the Exchequer has made the following statement under . . . the Human Rights Act 1998:
In my view the provisions of the Finance Bill are compatible with the Convention rights.''
Clearly, that is an important and serious statement. Parliament has every right to rely on it—that is how it is intended.
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The institute raised the matter as a potential issue and we have focused some of our concerns on it. I hope that during the debate on this and following clauses we can establish whether the institute's concerns are genuinely well founded. The Minister might need to reflect on a number of points.
Norman Lamb: It was pointed out to me earlier that I inadvertently addressed you incorrectly, Sir Nicholas. May I take this opportunity to apologise?
Briefly, I share the concerns raised by the hon. Member for Eddisbury. I received the same briefing from the Institute of Chartered Accountants in England and Wales. Although it seems a sensible reform to introduce the civil remedies, the institute expressed concern that the absence of due process with a civil remedy could give rise to numerous appeals, which could result in the setting aside of the penalty, thereby potentially reducing the efficacy of the civil remedies. I should be grateful if the Minister would deal in his response with the concern that the system could be clogged up because of the process of appeals, as well as with concerns about human rights. If due process is denied, a person could end up paying a penalty that is effectively criminal in its proportions, but that person would not have the protections that citizens have when faced with a criminal charge.
John Healey: I am grateful to the hon. Member for Eddisbury for his general approach in saying that the reform is sensible. Both he and the hon. Member for North Norfolk raised the question, which they had been briefed on, of whether the measure conforms with human rights legislation. Our view, and the view of parliamentary counsel, is that it does. Cases of evasion through dishonesty, which are dealt with under clause 25, are classified as criminal charges under the European convention on human rights. That classification entitles the taxpayer to the safeguards provided for in article 6(2) and (3) of the convention. It does not make the case a criminal case in UK law, however, and the Police and Criminal Evidence Act 1984 does not automatically apply. The procedures to be adopted when investigating cases under clause 25 are being modelled on those used in the VAT civil evasion penalty regime, which have been found by the independent VAT and duties tribunal to be human rights compliant.
On safeguards in what it is important to remember is a civil, not a criminal regime, under our set of proposals, when liability to penalty is first established, except when over £10,000 in duty has been undeclared, action will always be confined to a warning letter advising of the contravention and informing the taxpayer that future performance will be formally monitored over two years. Should similar contraventions occur during that period, a penalty may be imposed. As a further safeguard, the decision to issue a warning letter can be appealed about to a tribunal.
I hope that members of the Committee will accept the clause.
Question put and agreed to.
Clause 24 ordered to stand part of the Bill.
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Clause 25
Penalty for evasion
Question proposed, That the clause stand part of the Bill.
The Chairman: Before we begin the debate and further to the point of order raised by the hon. Member for Eddisbury on clauses 34 and 35 and the amendments to them, the Chair is happy for amendments Nos. 123 and 124 to be discussed with clause 34 and amendments Nos. 131, 132 and 120 to be discussed with clause 35. I hope that that meets the wishes of the Committee.
I understand through the usual channels that the Committee is likely to sit until around 7.30 pm today. If yesterday's happenings in the House are a guide, we shall probably have several Divisions on the Floor of the House on the third day of the Criminal Justice Bill. I suggest to the Committee that it might be sensible to try to combine a tea break for Committee members—and particularly for Ministers, Opposition spokesmen and the Chair, a comfort break—with a Division if one occurs around 5 o'clock and that we have a short break of, perhaps, half an hour then. I shall make an announcement at the time, but thought it might be helpful for the Committee to have some indication of that now.
Mr. O'Brien: I acknowledge with gratitude the approach that has been taken on clauses 34 and 35 with their attendant amendments. I dare say that I speak on behalf of all Committee members in thanking you, Sir Nicholas, for giving us guidance on the rest of today's business and particularly the timing of both tea and comfort. I am grateful to you for helping the Committee.
Turning to clause 25, the concept of dishonesty in evasion is retained, although there may be a question about the burden of proof because there is no need for the conduct in question to give rise to any criminal liability. The Minister's response on clause 24, and particularly his response to the hon. Member for North Norfolk, was helpful. The argument strayed into clause 25 and the hon. Gentleman has obviously received representations, as I have, about its application in relation to human rights and, therefore, the Police and Criminal Evidence Act 1984.
The Minister set out clearly the reasons for the possibility that the 1984 Act does not automatically apply in such cases. That went some way to alleviate some of the issues that have been raised in representations to us about clause 25. As a result of this short debate, the Minister will be able to add to that. The concern was that there might be an absence of due process. We were not minded to table amendments to the clause, but I await the Minister's response, although his response to clause 24 went a long way to assist me.
Mr. Jack: Could the Minister put my mind at rest about the way in which clause 25 will operate for someone who unwittingly evades a requirement to pay tax when that is subsequently discovered following inspection and discussion with a representative of Customs and Excise and when they had not knowingly
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set out to be dishonest? For those of us who have to deal with constituency cases in which constituents with small businesses run into problems over VAT, some words of reassurance would be helpful. Perhaps that is dealt with through the type of procedure that he described in clause 24, where letters of notice and warning are issued, but I should be grateful for some clarification.
10.45 am
Mr. O'Brien: My right hon. Friend raises an interesting point. I hope that the Economic Secretary will confirm that the concept of dishonesty is retained in the clause. There should have to be an element of intent combined with some knowledge.
Mr. Jack: I entirely agree with my hon. Friend's line of inquiry. We look forward to hearing what the Economic Secretary has to say.
John Healey: The hon. Member for Eddisbury probed the burden of proof, which is an appropriate and important line of questioning because we are looking to introduce a civil rather than a criminal regime. As he knows, comparing the two regimes, criminal cases must always be proved beyond all reasonable doubt whereas civil cases require proof to a lower level, known as the balance of probabilities. Although that is a lower level than proof beyond reasonable doubt, the more serious the allegation, the higher the level of proof must be. Thus, for civil evasion cases the level of proof required by the courts and VAT tribunals begins to approach the criminal standard, although it is still below it, whereas the level of proof required to demonstrate liability for default surcharge, for example, is lower.
The right hon. Member for Fylde is rightly concerned about the position of businesses that trade honestly and make unwitting errors, as he described them. The Government recognise that even the best-run businesses make occasional mistakes, and penalties will not automatically be issued in such cases. In addition, the new penalties are part of a much wider programme that Customs is putting in place to ensure that the changes are implemented smoothly and to improve compliance across the board. Those include a visiting programme to provide advice and support for new traders who wish to improve their general compliance; improvements in the way in which existing guidance is updated and made available; and the publication of compliance standards. Those standards will be published through the joint consultative committee, a body made up of a wide range of trade and other interests with a direct concern in this field, as I explained earlier.
On that basis, I hope that all Committee members will accept the clause.
Question put and agreed to.
Clause 25 ordered to stand part of the Bill.
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