Tax Fraud (Hansard, 23 July 1998)

§ Lord McIntosh of Haringey
My Lords, the tax authorities already have effective programmes in place to counter tax fraud and evasion. The Inland Revenue's work in countering tax evasion yields about £1.5 billion a year in extra tax, interest on that tax and civil penalties. The revenue also takes criminal proceedings in the most serious cases of all types of tax fraud. The Green Paper explains how the Department of Social Security itself is moving towards a similar approach; that is, civil sanctions backed up by prosecutions.

§ Baroness Ludford
My Lords, I am grateful to the Minister for his reply. In the light of that statement of commitment, can he explain why the title of the consultation paper Beating Fraud is Everyone's Business raised an expectation that it would be of general application, but only on opening it was it found to apply solely to social security fraud? Is it not the case that many of the aims and techniques in that paper, particularly as regards developing an anti-fraud culture in society, need to be applied to tax evasion? I note the figures that the noble Lord gave, but in the Inland Revenue's annual report for 1996 it is stated that compliance work brought in almost £5 billion. I understand that as a result of fraud work Customs and Excise recovered £1.5 billion in the same year. Therefore, is it not reasonable to assume that the sums involved in tax fraud may be even greater than in social security fraud? Can the Minister tell us how the 1039 Government will show that they appreciate the need for even-handedness? Do the Government have any specific plans for having a national tax fraud hotline to match the national benefits fraud hotline?

§ Lord McIntosh of Haringey
My Lords, I cannot answer all seven of the questions that the noble Baroness put to me. She referred to the Green Paper and said that she had to open it in order to see that it referred to social security fraud. She clearly did not observe that it was published by the Department of Social Security. That is made clear on the cover. I do not accept that there is any way in which tax fraud is being approached with less diligence than all other kinds of social security fraud. Nor do I accept that social security fraud is necessarily perpetrated particularly by poor people. On the contrary, a lot of social security fraud is carried out by systematic, organised criminals working on a very large scale. The analogies which the noble Baroness draws between social security fraud and tax fraud do not always hold up to examination in the way that she suggests.

§ Earl Russell
My Lords, does the Minister agree that, although fraud is always wrong, there is no more reason to suppose that there is fraud in the social security system than elsewhere, and that in taking measures against fraud, we must also take account of their cost-effectiveness? Is the noble Lord satisfied that the priority which tends to be given to social security fraud is cost-effective?

§ Lord McIntosh of Haringey
My Lords, one difference which ought to be pointed out between tax fraud and social security fraud is that it is possible to estimate the level of social security fraud by a systematic examination of a sample of paid claims. One cannot make the same assumption from an examination of tax returns. One cannot tell whether the person concerned has income which has not been declared for tax purposes. Although it is possible to estimate the level of social security fraud, that is not possible with tax fraud. I can only repeat that a very great deal of intensive effort both in this country and internationally is given to countering tax fraud.

§ Lord Hayhoe
My Lords, although they may not be very popular, does the noble Lord agree that the officers of the Inland Revenue and of the Customs and Excise service deserve approbation and praise for their dedicated work on behalf of the nation as a whole in trying to reduce fraud within the tax system as effectively as possible?

§ Lord McIntosh of Haringey
My Lords, I am grateful for the noble Lord's comments. A great deal of the investigative work into tax fraud is carried out routinely by local offices of the Inland Revenue. The Inland Revenue special compliance office deals with more complex and serious cases. That office alone brought in almost £0.5 billion last year. My understanding from the social security Green Paper is that the Department of Social Security recognises the need to develop a similarly highly skilled core of professionals to investigate benefit fraud. We can all learn from each other.

§ Baroness Williams of Crosby
My Lords, the noble Lord will recall that several months ago the Government 1040 promised to look into the issue of overseas tax havens. Can the noble Lord give us any idea of when the report of that study is likely to come before Parliament?

§ Lord McIntosh of Haringey
Yes, my Lords, and I am grateful for that question. With other member states of the Community, we have been taking steps to curb large international tax frauds. In May, the Chancellor announced UK-inspired G7 initiatives for the better exchange of information in action against tax crimes. We have appointed a member of the Inland Revenue staff to the National Criminal Intelligence Service to feed back laundering reports to the Revenue for use in tackling tax evasion.