HL Deb 04 December 1979 vol 403 cc576-81

2.57 p.m.


My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what steps they intend to take to deal with tax evasion and tax avoidance.

The MINISTER of STATE, TREASURY (Lord Cockfield)

My Lords, these matters are under constant review.


My Lords, in thanking the Minister for that very informative reply, may I ask whether he agrees that it would not be surprising for me to express disappointment at it?—particularly in view of the general concern among the great mass of tax payers at what they regard as an unfair and incorrect procedure at present. Has he any comments to make upon the statement attributed to the head of the Inland Revenue Department, that there is tax evasion on some £9 billion of income—7 per cent. of the gross domestic product—and that the tax revenue loss totals some £2 billion?


My Lords, I do not know why the noble Lord should be disappointed to hear that matters are under constant review. I should have thought that he would have been disappointed had he been told that the matter was not under constant review. With regard to the figures he quoted, they have been widely quoted without the qualifications which were given at the time they were quoted to the Estimates Committee. In commenting on certain estimates that had been made by other people, Sir William Pile said: The conclusion that my colleagues and I came to was that at that level it sounded a hit implausible, but that we thought it was not so implausible at 7½ per cent. of the gross domestic product ". The words he used were: it was not so implausible ". Of course, one of the problems with tax evasion is that it is necessarily carried out secretly or at best clandestinely. Consequently, it is impossible to produce any reliable estimate of the extent of tax evasion.


My Lords, would the Minister give an indication, and let us into the secret, of what this constant review has brought forth?


My Lords, may I give the noble and learned Lord some information of what the constant efforts have brought forth. Evasion is essentially a question of enforcement by the revenue boards. In the last three years, the total charge raised as a result of detected evasion by the Inland Revenue was as follows: in the year to the 31st October 1976 it was £22 million; in the year to 31st October 1977 it was £37 million; in the year to 31st October 1978 the figure was £47 million. I hope, therefore, that the noble and learned Lord would join me in congratulating the Board of Inland Revenue and their staff on their successful efforts in dealing with tax evasion.


My Lords, the House is indeed grateful to the noble Lord. Might it not have been more courteous if he had given us those figures at the beginning?


My Lords, the answer very simply is that I was not asked for them. Incidentally, the figures are published. May I refer the noble Baroness to the 121st Report. Perhaps I ought to qualify that and say that the figures for the first two years I quoted are published in the 121st Report of the Commissioners of Inland Revenue, which is available in the Printed Paper Office. In order to give the latest figure to your Lordships, I had the figure for the year to 31st October 1978 brought out in order to bring the picture up to date.


My Lords, has my noble friend observed that in his Question the noble Lord opposite has bracketed tax evasion with tax avoidance? Will my noble friend make it clear that there is a great distinction between the one, which is unlawful, and the other which the courts have constantly ruled is wholly lawful? If my noble friend, prompted by the noble Lord opposite, is looking for examples of tax evasion, will he look at some of the practices of the printing unions in Fleet Street?


My Lords, there is indeed a clear distinction between tax evasion and tax avoidance; a distinction which is well understood by most people. My reply dealt with both of them when I said that these matters were under constant review. The supplementary questions, of course, related to tax evasion, which is why I confined my reply to those matters.


My Lords, can the noble Lord tell us how much revenue is overpaid and not refunded to taxpayers?


That, my Lords, is a totally different matter. Overpayments do not normally arise as a result either of tax evasion or of tax avoidance.


My Lords, the noble Lord said that the distinction between tax evasion and tax avoidance is very well known. Can it be described as this: the one is cleverer than the other?


No, my Lords. The one is outside the law; the other is inside the law.


My Lords, would the noble Lord accept my assurance that I understand the difference between tax evasion and tax avoidance? Would he not agree that they are both immoral, and both disliked by the average taxpayer?


My Lords, when one comes to debate morality one is in a very difficult field indeed. One of the great problems with tax avoidance is that there is no unanimity of opinion as to what constitutes tax avoidance. If I may remind the noble Lord, there has been legislation against the Deed of Covenant in 1936, 1947 and 1964. Nevertheless, the Deed of Covenant is the main instrument used for charities in raising their funds.


My Lords, would the Government ask the chairman of the board designate, Sir Lawrence Airey, that one of his prime tasks in the forthcoming months and years should be to reduce the widespread tax avoidance that we all know exists? Further, would the noble Lord agree that, if there is to be an enthusiastic campaign against tax avoidance, or indeed evasion, the Revenue needs more staff and not fewer staff, as the Government seem to be thinking in relation to Whitehall cuts?


My Lords, tax avoidance is a matter for legislation. If the noble Lord was referring to tax evasion, the importance of dealing with tax evasion is well known to the chairman and the members of both Revenue boards.

The Earl of ONSLOW

My Lords, would it not make it much easier to stop tax evasion if income tax starting points were raised very substantially? Then the temptation to evade tax does not exist, because no tax is evaded. This would, therefore, not only cut down Revenue staff but avoid bringing large numbers of people into the criminal net.


My Lords, it is perfectly true that the heavier the burden of taxation the greater is the temptation both to evade and to avoid the burden. I think, however, that it would be too optimistic to think that reductions in taxation would totally solve this problem, which has been with us for a very long time indeed.


My Lords, will the noble Lord inform the House as to whether the views of the Board of Inland Revenue were sought prior to the Government's total abolition of exchange control? If their advice was sought, what was the advice? If their advice was not sought, why not?


My Lords, it is not customary for Ministers to answer questions of that nature. The effect of the abolition of exchange control on avoidance and evasion was considered by Ministers before they took the decisions which they did. The abolition of exchange control was essential from the point of view of the economic health of this country.


My Lords, concerning tax evasion, could the noble Lord tell us how much public money is recovered per member of staff engaged on this work, and how that compares with the amount of public money recovered by each member of staff engaged on work against social security abuses?


My Lords, I doubt whether it is possible to provide figures of that kind. I shall certainly have a look at the matter to see whether figures can be obtained. Of course, a great deal of the work on tax evasion is part and parcel of the daily work of the staff of both Revenue departments, and it is very difficult to separate out one part of their work from another.


My Lords, would the noble Lord kindly be prepared to take some advice on the difference between tax evasion and tax avoidance by going to the right reverend Prelates on this matter?


My Lords, I think, with respect to the noble Lord, that I fully understand the difference between tax evasion and tax avoidance.


My Lords, would not the Government simplify their problems enormously if the legislation in the Finance Act were not so extraordinarily obscure? At the moment, the two most rapidly growing industries in the country seem to be the increase in accountants, who try to discover possibly how to evade or avoid the tax which is imposed by equally clever accountants trying, by more and more sophisticated techniques, to complicate the whole problem. It seems to me that this is a battle in which no one gains, and some of the ablest men in the country devote their time to it. Some of the results have been quite extraordinary. Perhaps 1 can illustrate very quickly.

Several noble Lords: No! Speech!


My Lords, has the noble Lord heard of a case in which the House of Lords sat in its judicial capacity for four or five days debating the meaning of three words in the Act?


My Lords, I think that that was more in the form of a statement than a question, and I have the feeling that the House would rather like to get on to the Shipbuilding Bill.