§
Amendments made: No. 74, in page 40, line 14, leave out
which becomes due and payable by virtue of
and insert
the date for the payment of which is given by
§ No. 75, in line 18 leave out from first "on" to "that" in line 19 and insert "an earlier date".—[Mr. Joel Barnett]
§ 12 midnight
§ Mr. Peter ReesI beg to move Amendment No. 76, in page 40, line 31, leave out "1st July" and insert "5th April".
§ No. 78, in page 41, line 2, leave out "six" and insert "twelve".
§ No. 80, in line 10, leave out "1st January" and insert "5th April".
§ No. 81, in line 15, leave out "1st January" and insert "5th April".
§ No. 82, in line 18, leave out "six" and insert "twelve".
§ Mr. ReesThis group of amendments is designed to liberalise the interest provisions which accelerate and steepen the payments of interest by a taxpayer who is found on appeal to owe money to the Revenue.
On both sides of the House, we recognise the objectives which the Government have set themselves. We may even say, though with less enthusiasm than the Chief Secretary, that we welcome those objectives. Where we take issue with the right hon. Gentleman is in the methods that he has chosen to adopt.
1894 We appreciate that the Chief Secretary is anxious to accelerate the payment of tax. If the measures that the Bill introduces succeed in their objectives, I have no doubt that the amount of tax gathered this year will be substantially greater and will go far to offset the disappointment which the right hon. Gentleman must feel over the outcome of Amendment No. 30. It is not for me to rub salt into fresh wounds, but there will be a modest consolation for the right hon. Gentleman in these provisions.
However, we must strike a balance between the interests of the Commissioners of Inland Revenue and those of the taxpayers, and, as I read Clauses 44 and 45, I find no balance in these provisions. We have the most onerous provisions imposing interest on a taxpayer at a net rate of 9 per cent. which, with current rates of taxation, must be penal. I compare that with the repayment supplement that the Revenue may in certain situations be obliged to make, and I contrast the date from which the repayment supplement is to run with the interest payments.
The hon. Member for Durham (Mr. Hughes), who manfully, if silently, supported the Chief Secretary, was moved in Committee to make a solitary intervention, and he reminded the Committee that this embodied some recommendation of the Ombudsman, and tears practically came to his eyes as he testified to the generosity and the far-seeing nature of the Chief Secretary's measures. However, he was unable to explain why the repayment supplement is to run from a different date from the date from which the interest payable by a taxpayer is to be paid. This is an unattractive piece of asymmetry.
The Chief Secretary recognised that there might be a situation where a taxpayer won his case on appeal before Commissioners but subsequently, because it was a very refined point of law, he had his victory upset in a higher court. The right hon. Gentleman said:
The situation can arise that a taxpayer wins his case before the commissioners and there is no tax liability, the Revenue takes it to the courts, and eventually wins the case in the higher courts. In those circumstances, it seems unfair that the taxpayer should have to pay interest going back to the due date. I take that point, and hope to be able to have something drafted by Report to meet it." 1895 —[Official Report, Standing Committee A, 2nd July 1975, c. 804.]Alas, I have searched the Amendment Paper in vain—
§ Mr. Joel BarnettThe hon. and learned Gentleman has not searched anxiously enough. If he looks further on, he will find it.
§ Mr. BarnettWhen we come to it.
§ Mr. ReesIt would be a little more courteous if the right hon. Gentleman directed my gaze to it now. It does not immediately come to mind.
Since the right hon. Gentleman will not rise to the challenge, I wonder what he has in store for us. But, whether or not he has honoured his promise in that regard, he has not faced the argument squarely put to him in Committee that the interest provisions do not match the repayment supplement provisions. Unless they do, I believe that there is an element of injustice to the taxpayer.
Our tax system depends on the consent and co-operation of the whole body of taxpayers. Indeed, that has been recognised on many occasions by the Inland Revenue. If the good will of the taxpayer evaporates as a result of the crude and insensitive measures of this administration, we shall all be the sufferers—Somerset House not the least.
I do not expect the Chancellor of the Exchequer, with his woeful insensitivity in these matters, to appreciate this kind of argument. But the Chief Secretary has on occasions shown a certain understanding of and feeling for problems which can be thrown up by a rather heavy tax system. I hope, therefore, that he will live up to the spirit of good will that he has engendered from time to time in the past and will look a little more kindly on these amendments than he was disposed to do on equivalent amendments in Committee.
§ Mr. Joel BarnettI suggest that the hon. and learned Member for Dover and Deal (Mr. Rees) did not notice the amendment to which he referred because we have passed it. It was Amendment No. 73, relating to Clause 44, which he 1896 and others of his right hon. and hon. Friends were kind enough to approve a little while ago.
The amendments with which we are now concerned seek to extend the waiting period before interest will start to run to 12 months. The hon. and learned Gentleman made a comparison with the repayment supplement which is made on tax that is repaid late to taxpayers. I thought that he was a little churlish, as were the Opposition generally, because no Government have up to now been able to find a way of paying interest on arrears of repayment of tax. This Government have managed to find a way to accede to the request of the Ombudsman and the Select Committee that interest should be paid on tax that is repaid late.
As I explained in Committee, the tax that is repaid late concerns 5 million PAYE cases out of a total of 5½ million repayments of tax made each year. In those cases the repayment supplement will be payable from 12 months after the year in which the tax has been overpaid. The reason for that is simple. Before a repayment can be made, the taxpayer must submit a return in the following year. Frequently the whole of the following year elapses before the return is submitted and agreed.
Apart from that, as I explained on the previous amendment and frequently upstairs when discussing the comparison between PAYE tax payments and Schedule D, the Schedule D taxpayer—unlike the man on pay-as-you-earn who has to pay tax every week—even if he pays his tax on time, pays it from nine months as a minimum to 21 months after the year end in which the profits have been made. Therefore, when the hon. and learned Gentleman talks of a comparison with the PAYE taxpayer, he really is putting the matter unfairly.
We have allowed a six-month waiting period even beyond the nine to 21 months. The House will recall that the only reason why the tax has not been settled and the correct figure agreed between the inspector and the taxpayer is not the fault of the inspector. In the vast majority of cases it is because the taxpayer has not submitted his accounts, and he has plenty of time to do so.
The Government have at long last provided for the repayment of tax with interest, mainly under PAYE. I do not 1897 think it is a good argument to say that we should make the same comparison with Schedule D taxpayers and allow yet a further 12 months' waiting period. I am sure that on reflection the hon. and learned Gentleman will recognise that would be going much too far.
I know that my hon. Friends will accept the point readily and I hope that they will resist the amendment if, as I anticipate, the hon. and learned Member presses it to a Division.
§ Mr. RidleyIt seems to be necessary, every time my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) moves an amendment with his customary skill and diligence, for me to defend him from the Chief Secretary.
Once again, the Chief Secretary has used abusive language and has described my hon. and learned Friend as not at all comprehending the substance of the matters before the House. Once again I try to heal the breach which is rapidly opening between the two. I ascribe the fault for the breach entirely to the Chief Secretary because an amendment more reasonably moved would be hard to find.
It can often be the case that PAYE taxpayers will be those making the appeal and they will have paid tax in the week they earn the money so that if there is a long and drawn-out appeal which goes eventually to the top, there will be several years when they will have been out of their money. If they win the case, they will not get interest until a considerable period after they paid the tax. Many of those who could be penalised by this clause could be PAYE taxpayers.
The Chief Secretary's second point was that a great act of Socialist benevolence had for the first time made possible payments of taxpayer interest. Grateful as we are for this change in our law—and it is long overdue, in my opinion—it does not constitute an argument for saying that, when an appeal goes against him, the taxpayer should be made to pay interest on tax, from a much earlier date than if the appeal goes in his favour.
I understand that there will be a long delay before repayment of interest has to be made by the Treasury on money to be repaid to the taxpayer. We contend that in order to equalise the two disputants the date from which interest should be payable should be the same for the 1898 taxpayer as for the Revenue. That is the point of the amendment.
The inequity, of which the Ombudsman and many hon. Gentlemen have complained in the past, that one paid interest on unpaid tax to the Revenue but the Revenue did not pay interest to the taxpayer on tax to be refunded is met in part by this clause, but my hon. and learned Friend's amendment would allow it to be met in full. It is only right that we should continue to urge on the Government that in the payment of interest on tax to be repaid the taxpayer should be treated similarly to the Revenue. My hon. and learned Friend would be right to press the Amendment.
§ Mr. Peter ReesThe Chief Secretary takes great credit for being a member of the first administration which has introduced a system of payment of interest on taxes refunded by the Revenue—that is, a repayment supplement. That may be so, but he has the discreditable record of being a member of the first administration which has introduced measures for paying a penal rate of tax which will discourage many legitimate appeals. The one will be weighed by the country against the other. All I say to the Chief Secretary is that if we are to have repayment supplement, let it start from the same date as that from which the interest payable by taxpayers starts. If that proves administratively impossible, let the interest payable on tax due start from the same date as that on which the repayment supplement would start. In that way, fairness, equity and symmetry would be achieved.
This argument escapes the Chief Secretary. Therefore, I can only hope that it will be recognised in the country and that, in advance of that, my right hon. and hon. Friends will join me in pressing the amendment to a Division.
§ Amendment negatived.
§ 12.15 a.m.
§ Amendments made:
§ No. 77, in page 40, line 38, leave out 'Taxes' and insert 'principal'.
§ No. 79, in page 41, line 8, leave out 'Taxes' and insert 'principal'.
§
No. 83, in page 42, line 38, at end insert—
'(4A) Section 109 of the said Act of 1970 (which, in relation to tax charged in connection with loans and other payments made
1899
and shortfalls occurring before 6th April 1973, has effect as originally enacted and, in relation to tax charged in connection with loans made on or after that date, has effect as substituted by paragraph 13 of Schedule 24 to the Finance Act 1972) shall be amended as follows—