Clause 34 - Powers in relation to documents

Tax Credits Bill – in a Public Bill Committee at 3:30 pm on 24 January 2002.

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Photo of James Clappison James Clappison Shadow Spokesperson (Treasury) 3:30, 24 January 2002

I beg to move amendment No. 44, in page 22, line 8, leave out 'serious'.

We now come to a different subject—powers to investigate cases—and in view of the Paymaster General's comments in the previous debate, we hope that she will look on the amendment favourably.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

I hope that the hon. Lady will at least listen to my remarks before she responds, because we are trying to help the Government to investigate fraud and remove the self-imposed restrictions on the authorities' ability to investigate fraud.

The clause gives the Inland Revenue power to obtain evidence in cases of suspected tax fraud and refers to powers already conferred on the board by sections of the Taxes Management Act 1970. The amendment is designed to help the Government and to look at the operation of those powers and the type of cases that they cover.

The clause appears to draw a distinction between the conditions necessary for the use of the power to

require documents to be produced and the use of the power to enter, search and remove information from premises. There must be suspicion of tax credit fraud for the use of the power to require documents to be produced. However, suspicion of ''serious'' tax credit fraud is needed for the use of the power to enter, search and remove information from premises. The amendment relates to the word ''serious'' and the necessity for that hurdle to be surmounted before the power can be used.

The Paymaster General may say that entry on to premises is a more serious step than requiring documents to be produced, but I ask her to consider that all cases of tax credit fraud are serious enough to be dealt with by a sentence of imprisonment. We believe that to raise the threshold to ''serious'' will create many difficulties in practice for those who have to investigate this type of fraud, which as we have heard and as I believe the Paymaster General accepts, is open to collusion, involves complex considerations and many grey areas. It is therefore particularly important that the Inland Revenue has the power to enter, search and remove information from premises, if they are to carry out a thorough investigation of fraud and to prosecute in appropriate cases.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The clause applies to tax credit fraud and two sets of powers that apply in relation to serious tax fraud. The first set of powers involves the production of documents, and is applied to all tax credit fraud. The second set of powers involves the entry of premises with a warrant to search for documents and applies only in respect of serious tax fraud. The amendment seeks to apply the second set of powers in all cases of tax fraud. I want to explain to members of the Committee why the amendment should be rejected.

The powers in the clause to enter with warrants are new powers that do not currently exist in relation to working families tax credit. However, when considering the totality of the compliance regime, we felt that they should be added for the most serious cases, such as where organised criminal gangs were engaged in systematic fraud.

I do not need to remind the Committee that these are significant powers. I thought carefully before agreeing to give them to the Inland Revenue, because the tax authorities should be given the power to enter premises with a warrant only in extreme cases. The powers will be used only by specially trained officers from the Inland Revenue's special compliance office and never in normal tax credit inquiries. I do not agree with the hon. Member for Hertsmere that they should be.

As with any extension of power, there must be a strong justification for the extension that is sought and for Parliament to agree them. All fraud is serious, whether it is tax fraud or tax credit fraud. I wanted to make it clear that a poor tax credit claimant does not have to fear that, if they make a genuine error, there will be a sudden knock at the door and the Revenue special compliance unit will be there. To addition of the word ''serious'' limits the powers to cases involving

large amounts of money. Because there are natural limits to an individual's tax credits entitlement, we do not think it right that the power should depend on the seriousness of the fraud against the public purse.

However, we need the powers to require the production of documents in such cases, and I have left those in place. That is because there may be factors in an individual claim that are indicative of organised fraud, but the sums of money known to be in question at the time that the documents are required to be produced may not warrant the tag ''serious''. That is the point about prosecuting somebody for a crime that has not yet been committed. Not unreasonably, the courts take a strong line on the matter, and claimants must be in receipt of tax credits, as the hon. Gentleman, who is a barrister, may know.

The position is different for search powers, and I make no apology to Parliament for that. It is my job as Paymaster General to ensure that where there are extensions to powers of this type they are fully justified, and they are not justified in respect of tax credits.

It is clearly more intrusive to enter someone's premises and search for documents, than it is simply to require them to produce documents. We have been cautious about extending these powers, and I make no apologies for that proportionate approach. The powers allowing entry to premises should apply only if the sums of money involved are such that the Inland Revenue is in a position to demonstrate to a judge that there are reasonable grounds for believing that there is serious tax fraud. It is right that the Inland Revenue should be subject to checks and balances, which it rightly sought.

These are not clear-cut decisions, and this is an area in which we should move with caution. We have to balance the reasonable rights of the citizen against the need to tackle those who deliberately set out to cheat the tax credit system in an organised way. We feel that the provisions in clause 34 strike the right balance, and I therefore hope that the hon. Member for Hertsmere will be reassured about the way in which the Bill is framed. If, however, he feels unable to withdraw the amendment, I shall have no hesitation in asking my hon. Friends to oppose it.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury) 3:45, 24 January 2002

I am surprised by the strength of the Paymaster General's response when we were trying to help her. A few moments ago she criticised us for not doing enough, but when we try to help her she takes a trenchant line. Perhaps she has strong views on the subject.

I shall give the Paymaster General an example of where her attitude will create difficulties in practice. She says that in the case of suspected tax fraud it is sufficient for the Revenue to have the power to require documents to be produced. That is all well and good, but requiring documents to be produced relies on the honesty of the person concerned to produce them. If they do not produce all the documents, there will be little that the Inland Revenue can do about it. Of course, it is the honesty of the person concerned that is in question in the first place. In order to prosecute

these cases it is important to have the documents to consider as evidence.

The Paymaster General speaks as though the power to enter premises and search for documents is out of the ordinary, and she takes a strong view on it. I shall go away from the debate and study provisions that are made elsewhere in criminal law to generate powers for authorities to enter premises and search for documents because I suspect that those powers are more widely available than she seems to believe. I shall be concerned if I find as a result of my investigations that the Government are placing those who investigate tax credit fraud under a handicap that people such as the police, who investigate other types of fraud or offences in the private sector, are not.

We do not want unnecessarily to handicap the authorities in the investigation of tax credit fraud, and we do not want to draw a distinction between tax credit fraud and other types of fraud. I shall examine this carefully and reflect on it, and I may return to it. On that basis, and the need to make progress with the Bill in the relatively modest amount of time that is available given the many important issues that we need to discuss, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 34 ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.