Tax Evasion (Hansard, 2 March 1995)

§ 6. Ms Lynne
To ask the Chancellor of the Exchequer what steps he is taking to gather information on the sums of money lost to the Exchequer through tax evasion.

§ The Financial Secretary to the Treasury (Sir George Young)
There is no reliable way of measuring the extent of tax evasion. What is important is for the Inland Revenue to investigate suspected evasion across all areas of taxation—which it does—and to collect tax that is payable.

§ Ms Lynne
Is the Minister aware that £4 billion is lost each year in uncollected tax? Meanwhile, the number of Inland Revenue support staff is being cut by a further 25 per cent. Is it not madness to cut staff numbers when the uncollected tax bill is soaring?

§ Sir George Young
The reduction in the number of Inland Revenue staff is being paid for, or secured, by a move to self-assessment and the introduction of information technology. The important point, however, is that counter-evasion work is not being cut. On the contrary, over the next five years the Revenue will put more resources into such work from routine processing.

§ Mr. John Townend
Does my right hon. Friend agree that the lower the levels of taxation, the less will be the incentive either to evade or to avoid tax? The loss of revenue will also be much lower.

§ Sir George Young
My hon. Friend makes a crucial point. When tax rates were approaching 100 per cent., the incentive to avoid or evade tax was relatively high; now that we have reduced tax, with the highest rate at 40 per cent., the incentive to engage in the creative accounting referred to by my hon. Friend has, of course, been sharply reduced.

§ Mr. Maginnis
Does the Minister agree that there is every incentive for people to avoid paying tax, given the profligate way in which the Secretary of State for Northern Ireland spends taxpayers' money? He has embarked on a door-to-door drop, delivering to every house in Northern Ireland the Government disinformation that is contained in the framework document.

§ Sir George Young
I am not sure that the Financial Secretary to the Treasury is the best person to respond to 1171 that question, but I am sure that there was value for money in every action taken by my right hon. and learned Friend the Secretary of State for Northern Ireland.

§ Ms Primarolo
In the context of tax evasion and loss of money to the Exchequer, is the Financial Secretary aware of last week's National Audit Office report, which showed that £800 million of VAT had had to be written off because his Department had not collected it? People will be shocked to hear that, at a time when the Government are imposing VAT on fuel and proposing to cut the number of VAT offices collecting the money. What steps will the Government now take to ensure that money is collected from businesses and individuals alike when it is owed, rather than extending the scope of VAT on fuel?

§ Sir George Young
Both Customs and Excise and Inland Revenue have a very good record of collecting tax that is due and payable to them, but if there is no money to be collected because, for example, the business is insolvent, clearly the money cannot be collected. The bulk of write-offs to which the hon. Lady referred were because, in fact, the cash was not there to pay the bill.

§ Mr. Clifton-Brown
Pursuant to my right hon. Friend's answer, if it follows that when the top rate of tax was reduced from 98 per cent. to 40 per cent. the tax take went up, it also follows that the amount of evasion went down. Does it not therefore follow that if the Labour party were to put up tax rates, the amount of evasion would increase?

§ Sir George Young
My hon. Friend is absolutely right in his last point and, crucially, in his first point, too. Although we have reduced the top rate of tax, higher earners are now contributing a bigger percentage of the total tax bill than they were in 1979.