Mr.
Hoban: Indeed, and those are not the only types of income
or clients that the Revenue’s website has a problem with.
Members of Parliament cannot submit returns online at the moment. There
is a great deal of work to be done to ensure that agents and their
clients can submit online a range of returns reflecting the complexity
of our tax system.
There is a
risk that, with the shortening of the deadline, people will submit
estimates or provisional figures. In addition, there is no electronic
system for amending a tax return, so the HMRC will receive manual
amendments that correct, update and revise data submitted online in
accordance with the suggested deadline. As my hon. Friend the Member
for South-West Bedfordshire (Andrew Selous) said, the current system
for submitting tax returns online has limitations. As well as being
unable to deal with the forms of income that he mentioned, the HMRC
cannot accept additional documentation online so that, too, has to be
submitted in paper format. It is clear that the implementation of the
recommendations of the Carter review will create problems not just for
advisers and their clients but for the HMRC.
The Public Accounts Committee
report on theissue contains interesting evidence from the
HMRC. On page 18 of the evidence section of the report,David
Varney, the chairman of the HMRC, says of moving the paper filing
deadline to
September: “Whilst
this would provide a single combined date that already has currency for
SA taxpayers, it would create an un-manageable paper filing peak in
September as well as clashing with the tax credits renewal
peak.” Even
the chairman of the HMRC recognises the problems that will be created
by the Carter recommendation to bring forward that filing deadline. The
report contains a graphic illustration of the peaks. The graph on page
16 demonstrates that there are peaks in both September and January for
returns that are filed by post. If we move the deadline for filing
paper returns from January
to September, we will create a huge spike in the HMRC’s work
load, dwarfing the number of returns submitted online at the moment.
Even the HMRC recognised that problem, as did the Public Accounts
Committee’s report, which acknowledged the major peaks in work
load at the time of the September and January filing deadlines and
highlighted issues around smoothing those peaks and improving the
accuracy and efficiency of the tax
system. 10.45
am In conclusion,
issues need to be resolved that affect taxpayers, their agents and the
HMRC to ensure that their work loads are dealt with sensibly. It would
be no answer to the PAC’s recommendations for smoothing the work
loads if those of the HMRC, businesses and their advisers are simply
compressed into short spaces of time creating an increase in the number
of errors, estimates and re-statements that would require a long tail
of remedial action. It
is a pity that those changes have not been introduced in line with the
HMRC’s code of practice on consultation. That has caused a great
deal of unhappiness and disappointment among tax advisers. In recent
weeks, we have heard about the importance of consultation and agreement
before major changes from the Treasury, yet it seems keen on
pre-emptive announcements and deadlines for changes. It would have been
far better to have discussed the matter with interested parties, rather
than to have sprung the decision on them without
warning.
The
Chairman: Before I call the next speaker, may I take this
opportunity to remind the Committee that the clause is about rates and
that although it is not unreasonable to allow those on the Front Bench
a little latitude, we cannot have repetitive debate? I insist on
that. Julia
Goldsworthy (Falmouth and Camborne) (LD): I shall attempt
to return to the substance of the clause, which is actually very
straightforward because it leaves income tax rates as they have been
for some time. There
is an issue of fairness. In a fair taxation system, those with higher
incomes should pay a higher proportion of tax than those in the lower
income brackets. In our taxation system, however, the bottom 20 per
cent. of households pay 39.5 per cent. of their gross income in tax,
whereas the top 20 per cent. of earners pay only 34.2 per cent. That
might not be because of the income tax levels themselves, but because
of other increases in, for example, national insurance and council tax,
which year on year have risen above the rate of inflation. That has led
to inequality in the system. What plans does the Financial Secretary
have to make taxation fairer given those inequalities that still exist
despite the existing rates of income
tax? Sir
George Young (North-West Hampshire) (Con): I welcome you,
Mr. Benton, to the Chair. I wish to add a brief footnote to the
excellent speech that my hon. Friend the Member for Fareham (Mr. Hoban)
made
from the Front Bench. Much of the Finance Bill has little impact on the
average taxpayer, but the change that he mentioned will by its nature
impact on everybody who submits a tax return. They, and indeed the
Committee, are entitled to a better explanation than the one that we
have had so far for bringing forward the
dates. First, if we
make those changes, there will be a penalty on those who, for whatever
reason, cannot submit their tax returns electronically. They will have
an earlier filing date. It would be helpful if the Financial Secretary
explained why, 10 years after self-assessment was introduced—I
was the Financial Secretary who introduced it—it is still not
possible for Members or civil servants to submit their tax returns
electronically.
Secondly, it
would be helpful also if we could have up-to-date figures for the
numbers of tax returns—electronic and paper—submitted
between September and January so that we can see the impact of the
proposed reforms. My hon. Friend referred to such figures from a PAC
report. Those reforms would compress dramatically from July to
January—the current time frame—to July to September or
November, the effective working time in which tax returns are produced.
Inevitably, that will concentrate them more in the holidays. It would
have been better if there could have been slightly more effective
consultation with those involved before those reforms were
introduced. According
to a survey produced by the Society of Professional Accountants, 84 per
cent. stated that the earlier filing dates were not readily attainable.
I am sure that the Government do not want to introduce a reform that
those who will have to deliver it believe to be unattainable. If the
Government want to move the dates forward, perhaps they could stage the
process and bring them forward one month at a time rather than all at
once. That would allow the accountancy profession and taxpayers more
time to adjust to the demanding schedule that the Government wish to
impose.
John
Healey: Clause 23 sets income tax rates only for the
current financial year, but I have some sympathy with the hon. Member
for Fareham, who tabled amendments to the clause that were judged to be
outside the scope of the Bill. I say to him that the measures following
Carter’s review are not in the Bill. We intend them to be in
next year’s Finance
Bill. I
shall pick up the point about consultation made by the right hon.
Member for North-West Hampshire(Sir George Young) and the
hon. Member for Fareham. In July 2005, we asked Lord Carter to advise
us on increasing the usage of the HMRC’s online services. I do
not accept that there has been no consultation. Many representations
were made to Carter’s review team, which contained several tax
agents from different fields. We published Lord Carter’s report
at the Budget, and we issued alongside it a partial regulatory impact
assessment. We specifically invited views and evidence on
Carter’s recommendations from those in the fields involved and
from anyone else, and we have set a deadline of 30 June for those
consultations. There has been plenty of time to contribute and to
influenceLord Carter’s thinking in the preparation of
his report and our thinking on how we may implement his recommendations
in next year’s Finance Bill.
Mr.
Hoban: I recognise that certain changes need primary
legislation and will be introduced in the 2007 Finance Bill. It is
interesting to note that evidence to the PAC suggested that the changes
would have to be introduced in this year’s Finance Bill to be
effective, in line with the recommendations of the Carter
report. For a change
of such magnitude, tax advisers would have expected a discussion paper
to be published and debated in the industry, rather than the Carter
review being published and the Government saying that they would accept
its recommendations. They expected a more formal process of
consultation, rather than simply having to comment on the effectiveness
of recommendations that the Government have already committed to accept
and
implement.
John
Healey: I had not yet finished dealing with the process
that we are going through to get in place eventually the measures that
we feel are appropriate following the review that we asked Lord Carter
to make. It is out for consultation and we have invited, and welcome,
views and evidence. I shall take the hon. Gentleman’s comments
in Committee as part of that
process. My hon.
Friend the Member for Bishop Auckland was right to refer us to the
National Audit Office report published in February. I say to the hon.
Member for Fareham that the PAC takes a tougher line thanLord
Carter on the mandatory filing of electronic returns. The purpose of
the Carter review and of implementing its recommendations is quite
clear: it is to have the most efficient tax service and system possible
for taxpayers and to continue to support the necessary and proper
efforts of the HMRC to ensure compliance. I do not want to get into the
detail of Carter’s recommendations; we will have a full
opportunity to do so when next year’s Finance Bill is published.
I simply say that nobody will be required to file a self-assessment
return online. We are looking to simplify the self-assessment to take
as many as possible of those whose tax affairs are relatively simple
out of the self-assessment system
altogether. Having
rightly pointed out that the clause is straightforward, the hon. Member
for Falmouth and Camborne (Julia Goldsworthy) asked a much more general
question about fairness in the tax system. I remind her that, as a
result of the personal tax and benefit reforms that the Labour
Government have put in place since 1997, in real terms this year,
households will, on average, be £950 better off. Families with
children will, on average, be £1,500 better off and families
with children in the poorest fifth about whom she is worried will, on
average, be £3,400 better
off. When we consider
the income tax rates under the clause alongside the operation of the
tax credit system, about four in 10 families now pay no net tax. A
two-child family earning up to £21,000 as a result of the
combination of the tax and tax credit system pay no net tax. I say to
the hon. Lady that, in my book, that is a fair tax system and it is one
that we are keen to protect and
develop. I welcome the
contribution of the right hon. Member for North-West Hampshire who was
a much more distinguished Financial Secretary. It is still not possible
for Members of Parliament to file their tax
affairs online. He will know that there remain long-standing concerns
about the additional safeguards that are judged appropriate for the tax
affairs and personal data of MPs. There have been lengthy debates on
the subject that, in some cases, pre-date the current Government. That
is why the HMRC still handles those tax returns separately from the
system that is set up for other
taxpayers. I hope that
with my explanation and my final reassertion of the fact that we expect
to bring forward a packet of measures to implement specific proposals
following Carter in next year’s Finance Bill, when there will be
a full opportunity for the sort of the debate that the hon. Member for
Fareham wants in Committee this morning, the Committee will allow the
clause to stand part of the
Bill. Question
accordingly agreed
to. Clause 23
ordered to stand part of the
Bill.
Clause
24Charge
and main rate for financial year
2007 Question
proposed, That the clause stand part ofthe
Bill.
John
Healey: I will attempt to be brief on
this clause, too. The Labour Government are committed to maintaining a
modern, fair and competitive corporation tax system. That is becoming
more important in what is increasingly a more flexible and competitive
global trading environment. Since 1997, we have therefore attempted in
part to promote enterprise by reducing the headline rate of corporation
tax from 33 per cent. to 30 per cent., the lowest United Kingdom
corporation tax rate since its introduction. Alongside that, we have
introduced several more targeted measures, including relief for
research and development costs, which we shall debate under future
clauses. The clause
will enable corporation tax to be charged for the financial year
2007-08. It sets the main rate for that year at 30 per cent., which is
no change from the current rate. I commend the clause to the
Committee. Julia
Goldsworthy: The Financial Secretary talked about
competitiveness. Although corporation tax rates have fallen in recent
years and have remained unchanged since 1999, they have been falling in
other developed countries. I should therefore be interested to know
what investigation his Department has carried out into whether the
United Kingdom looks set to remain an attractive place for investment
compared with other countries. I want also want to know his future
projections for revenues from the tax since, in 2004-05, the UK
revenues from corporation tax, excluding North sea oil, represented 2.6
per cent. of the total tax take. Including North sea oil revenues, the
figure is 3.3 per cent., which is very high for countries in the
Organisation for Economic Co-operation and Development. I shall be
interested to know what future implications he thinks that that will
have for competitiveness. Are the taxes are being relied on more
heavily because of the commitment not to increase income
taxes?
11
am
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