Oral evidence: HM Revenue and Customs and HSBC, HC 1071Wednesday 25 February 2015
Oral evidence, 25 February 2015.
Witnesses
Lin Homer, Chief Executive and Permanent Secretary, HM Revenue and Customs, Edward Troup, Second Permanent Secretary and Tax Assurance Commissioner, HM Revenue and Customs, and Jennie Granger, Director General, Enforcement and Compliance, HM Revenue and Customs, gave evidence.
Chair
The data that was obtained from the French authorities, came under heavy restrictions, didn’t it, and to what extent has that cramped your style?
Lin Homer
Chair, thank you. Yes, the data that we received from the French in April 2010 came under very strict international treaty conditions, which limited its use to tax purposes only and prevented us from sharing the data with other law enforcement authorities for investigating potential other offences. I have to say I am pleased to say that on 23 February, so earlier this week—
Chair
I wonder if I can have an answer to the question and then we will come on to any good news you might have. What I would like to know is how that cramped your style.
Lin Homer
What that meant is that we could use the data for the purposes of tax crimes and tax issues. We could not share it with our colleagues in wider law enforcement and we could not use it, for instance, for wider offences such as money laundering and we couldn’t, therefore, triage it against other people’s data to see whether what we could see and what others could see would make a more comprehensive picture put together.
Chair
So you could not share it with any other UK body?
Lin Homer
No, other than the CPS I should mention because obviously they are a prosecuting authority, so clearly the data that we discuss with them to consider individual prosecutions that is in their function and progressing our tax—
Chair
We are now five years down the road. I want to get clarity about what you would have been doing in those five years had you been given a free rein.
Lin Homer
We are increasingly—
Chair
What have we missed out on?
Lin Homer
What we have missed out on potentially are wider offences and the ability to interrogate the data with colleagues and, as I say—
Chair
I am terribly sorry but what do you mean by that “interrogate the data with colleagues”?
Lin Homer
I might invite Jenny to explain but essentially, if you are gaining data from more than one source you have the opportunity to enrich the data that you have. One of the big challenges for us with the Swiss data is it was poor quality data; it was stolen from another jurisdiction. That Government and that institution were not in any way collaborating with us to improve the quality of the data and, therefore, it proved of limited value in a number of our investigations.
Chair
There are rumours that there is good news afoot. Have we finally, five years later, got a bit of good news to tell from France on this?
Lin Homer
Yes. We do, and I should say we were incredibly grateful for the data. We have £120 million of tax and about £15 million of penalties in from what we have, which is we think the tax was due. But on 23 February the French have formally confirmed to us that we can share the stolen HSBC Swiss data with our law enforcement agencies and regulators for the purpose of pursuing wider offences. We have arranged our first multi-agency meeting to discuss what we do with that data next week under Jenny’s teams.
Chair
So five years later we are finally going to get on with some of the things that you have said that you would like to have done much earlier. If it had been the French authorities asking the British authorities for this information, how long would it have taken them to get it?
Lin Homer
It does depend on what the request is for but—
Chair
Well, I am asking for a reciprocal case.
Lin Homer
Yes. I think we are keen to collaborate internationally and we do so. You know that HMRC has strict rules so we need a legal gateway, but I think we are more able through our Legal Gateways to share with the whole of Government, whereas one of the things the French do is they like to share department to department, so this was tax authority to us—you know, to tax authority—not tax authority to British Government.
Chair
I am sorry to press you but in a reciprocal case how quickly might the French have got hold of this?
Lin Homer
We will share data in a matter of days on some events. I am bound to bring someone out of the closet who will tell me that we took longer, but I think it has been—
Chair
So are we talking about weeks or months rather than five years?
Lin Homer
We would certainly strive to be as helpful as we could as quickly as we can, and, yes, I think it has taken us a long time to get to this point. I would want to emphasise that we have achieved a great deal with the data the French gave us.
Chair
You have already mentioned that and no doubt you will have more opportunities to do so, but what we are illustrating with this is that we could have—
Lin Homer
Is that we had serious limitations.
Chair
Yes, you had serious limitations. It would have been helpful to have had this data much earlier. We would supply it to the equivalent authority—in this case the French—much earlier and it is telling us, bearing in mind we are trying to track down tax evaders here, we are trying to track down criminal activity. We need a good deal more international co-operation in this field, don’t we, to deal with tax evasion?
Lin Homer
I am sure if we get the chance—and I think you have heard a little bit this afternoon. I think the landscape has changed dramatically and we have some substantially greater powers now.
Chair
Yes, but not in France.
Lin Homer
No, in France as well because they have been part of the international work to create a common reporting standard.
Chair
That is as may be but it hasn’t helped them deliver this any quicker, has it?
Lin Homer
With regard to this particular data it hasn’t but—
Chair
No, so it would have been much more helpful if we could have had it earlier from the French. I will let Ms Granger in who has been itching to say something for some time.
Jennie Granger
I have, Chair.
Lin Homer
I am not sure Jennie has appeared in front of the TSC before. I think this might be the first occasion you have met.
Jennie Granger
It is indeed.
Chair
Well, welcome aboard.
Jennie Granger
Thank you.
Chair
We are all ears now for this thought.
Jennie Granger
Thank you. I did want to say something about how we do share data now, because I think it might be reassuring for the Committee, and indeed work a lot more internationally together. We have very good collaboration with the French and, indeed, other European authorities. Probably what is most in the news is tobacco smuggling and other areas, but I would want to emphasise I think these days we do much better. In terms of sharing it more broadly here in the UK, we quite routinely these days see Legal Gateways work with the National Crime Agency, DWP and others, so it is often a huge advantage to us to be able to compare our data, to be able to, for example, help them detect organised criminals, so there are lots of reasons why we would want to be able to share this data more broadly.
Chair
Thank you very much.
Steve Baker
Is simplicity the key to fighting tax avoidance?
Lin Homer
I think that is a bit of a simplistic statement, I am afraid, Mr Baker. Obviously if there is great clarity and good evidence it is easier to pursue, particularly in criminal proceedings, but I think what I would say is the most important aspects of a successful prosecution for us will be both the quality of the evidence and, in particular, the evidence chain and then collaboration between us and other agencies, which might be other law enforcement agencies or other countries but might also be other institutions, so it is not always simplicity, no.
Steve Baker
If I may, I will put it a different way. I know that I am not conversant with the entire tax code. It is way too long and I am pretty sure—I am sure some colleague here will correct me—that no Member of Parliament in this great august body, which legitimises that tax code, no other Member of Parliament is familiar with that tax code from one end to the other. Are any of you familiar with the tax code from one end to the other?
Lin Homer
I am certainly not. Both my colleagues are tax experts and I would be disappointed if they did not know every piece of legislation inside out. No, of course we accept that our tax system is incredibly complex. What I would say is that our approach to dealing with people takes into account their circumstances and, throughout, whether this is offshore evasion, whether this is activity onshore, if people come to us and disclose and say, “I’m not sure what I’m doing here” we will always treat them with greater support than if we have to go and find them. Because we do understand that there is complexity, so one very good example of that at the moment—and it has been so for the last three years—we have about 700,000 time-to-pay arrangements, mainly with small businesses and individuals where they are behind. Some of that will be error as well as straight inability to pay and we give them time to sort out. I would love our tax system to be simpler. I am not holding my breath for it to be so.
Steve Baker
So is the HMRC committed to a simpler tax system?
Lin Homer
We take all the opportunities we can but I think we are committed to making it easier to understand, even if legislatively it remains more complex.
Steve Baker
Of course I led with avoidance there. A similar question with evasion. When it comes to: does that behaviour comply with the law or not, to what extent would a simpler tax code assist on the question of evasion?
Lin Homer
I might ask Edward to try to define these things.
Edward Troup
I think if you are looking at criminal evasion and criminal prosecutions, then we are mainly relying on common law offences of cheating the Revenue, conspiring to cheat the Revenue, fraudulent under-declaration and the complexity of the underlying law is not really the question. It is the evidential question of whether someone had the intention and did actually cheat the Revenue. So the issue of evasion and simplicity are not so closely linked as the issue of avoidance, where complexity of the tax rules do give rise to opportunities of avoidance, which are addressed in a number of ways through targeted anti-avoidance rules and by attempts, whether through the Office of Tax Simplification or otherwise, to simplify the tax rules.
Steve Baker
One of the reasons I asked about your role as HMRC, and indeed the Office of Tax Simplification—and perhaps you could say a word in a moment about your relationship with them—is that I am quite sceptical now of Parliament’s ability to simplify the tax code because of the practical business of not understanding it. So I have been in a committee room just like this one and I have opposed tax breaks for film schemes. I have done that because, as Mr Troup’s smile I think gives away, we all know that film schemes have been one of the great sources of controversy and aggressive avoidance. It seems to me that it is nonsense that Parliament is still incentivising investment in films when one of the highest profile, at least, activities in relation to aggressive avoidance is in relation to film schemes. Could you help me untease what is going on?
Edward Troup
I think that is in a sense fair but also unfair because I think, you are absolutely right, we have a huge amount of historic avoidance with film tax relief dating back to the early days of the tax relief right through the 2000s. But the film tax relief was dramatically reformed—and I am sorry I do not have the exact year, I think it was 2007 or 2008, and it is now working very much in the way that Parliament intended and is giving tax relief to incentivise genuine investment in films and, as you know, is being extended to theatre tax relief. But I think the historical aspect of that is a very good illustration of what you say. The original film tax relief in a sense was both too generous, and probably not thought through fully by our colleagues, and did allow for a degree of avoidance that we still have to tackle.
Steve Baker
I pick on that example because I have been on the Statutory Instrument Committee, which has brought forward the measure, and I have opposed it but I cannot help wondering how many other areas where you are active in combating tax avoidance or possibly evasion. The activity that originally began the process was possibly even incentivised by Parliament as it has been in the case of film schemes. Could you give me some idea of the scale to which people’s behaviour begins with a Government incentive to invest in a certain way?
Lin Homer
I think the film relief example is quite a good one, both because Government’s intention was clear and in the revised film relief we think has been delivered. So I think every country in the world uses tax reliefs to a degree to incentivise types of behaviour or disincentivise types of behaviour, but it can be a challenge to persuade people to keep within the confines of what Parliament intended. We have had 42 changes of the law that help clarify and close down attempts to broaden Parliament’s intention but more recently we have also brought in a couple of things, which I might just ask Jennie to mention, both in the way that we work, a counter avoidance team. But also some new approaches, the most important one of which I think is what we call accelerated payments, which change the balance of benefit from tax avoidance. People knew generally that by the time we got to tribunal we won most of our cases, but it was sometimes worth taking the risk simply for the delay and perhaps if Jennie gives you a sentence or two about that you will understand how we think we are very successfully challenging this kind of gaming that could happen in the tax avoidance space.
Jennie Granger
Accelerated payments means that once we issue a notice that you are required to pay upfront, what we were finding, as Lin said, was the time value of having the money was sufficient to be in these artificial schemes. So far we have issued about 5,000 that has a value of—just so we understand the scale of this—£1.3 billion. That is the value on that and already over £200 million has been paid. To go to your other point, we also recognise that people need some health warnings about what we are concerned about as well. We know we win about 80% of these cases and we think people are riding too much on the 20%, so we do a range of things now. We issue warnings called spotlights that say, “This is one we have looked at that we are concerned about”. We publicise much more clearly now the results of litigation and we—
Lin Homer
Punish high risk promoters.
Jennie Granger
Yes, so there is a range of—
Steve Baker
I am sorry to interrupt; forgive me, forgive me, I am sorry to interrupt. I am very conscious of time and I have allowed the conversation to go on to the broader issue. I just wanted to touch on that in order to ask you: how does all of this issue of tax simplification feed into the specific context of HSBC in the current scandal? Has a complex tax code fed into creating the set of circumstances that we have seen in relation to HSBC’s Swiss branches?
Lin Homer
I think it is important to repeat what Edward said that I do not think in relation to hard edged evasion it is much of an issue here. Evasion is criminal; has been and will remain so. People who knowingly try to do something illegal are committing a crime and if we can get the evidence to prosecute them we will seek to do so. What I think has happened—and I think you heard some of this in the evidence earlier today—is that there was definitely a culture in the mid-2000s when banks and other institutions were aggressively marketing avoidance schemes, and I think that has created an environment that we were not happy with. The code of practice, which I think was introduced in 2009 was a very specific response to that to say, “This type of behaviour is not acceptable and we will expect more of you” and we think that has been quite significant.
Steve Baker
I am going to try to keep it on HSBC because I am aware that the Chairman will tell me I am out of time any moment.
Chair
Yes, I am. Yes.
Steve Baker
On the UK-Swiss tax agreement it states that the UK Government “will not actively seek to acquire customer data stolen from Swiss banks”. To what extent has this agreement limited your interaction with the French authorities when you have been seeking to secure these prosecutions?
Lin Homer
Not at all.
Edward Troup
Sorry, shall I give a little bit of context to the Swiss agreement? Because I think quite a lot of the commentary has confused the issue of the Swiss agreement with the issues that have been going on with HSBC and the Swiss data. The Swiss agreement, which was entered into at a particular point in time at the end of 2011, was there to address the fact that at that time banking secrecy in Switzerland meant that we knew that there were accounts in Switzerland that we did not have information on. It was a ground-breaking agreement, which has allowed us to get already £1.2 billion with nearly £2 billion in total in prospect. It was done with the Swiss at that point. It is time limited. It was done at a point where we knew about the HSBC Swiss data and those people whose names are on the HSBC Swiss data list are absolutely excluded from the Swiss agreement. So it is entirely separate. As I say, under that agreement we are getting nearly £2 billion. It was a difficult negotiation and it was negotiated during the course of 2010/11 and as part of the negotiations the Swiss who at that time were extremely sensitive about the fact that the data had been stolen asked us to agree that we would not actively seek to effectively encourage others to steal Swiss data, and that was the limitation of the restriction there.
Steve Baker
On very much that point, in the previous session Mr Mann highlighted that—he did not quite put it this way—one person’s data theft will be a another person’s whistle-blowing. Is this a phenomenon that you recognise and are you adequately equipped with powers should somebody decide to whistle-blow on a Swiss bank?
Lin Homer
Yes.
Jennie Granger
First of all, there is nothing in that agreement that would stop us accepting data from a whistle-blower regardless of the source. It merely restates some of the more general policy and that most revenue authorities have. We should not be encouraging people to steal wherever they are. That is simply the point it is making. In terms of us being able to get that level of co-operation from the Swiss, one of the things that we are very pleased about is not just the agreement that Edward has mentioned but also the Swiss have announced they are going to join the Common Reporting Standard from 2018. The Common Reporting Standard—90 countries are now prepared to report to each other banking information on their nationals—is a dramatic step change in what we will all be able to do here and, frankly, it is the thing that is most going to close down people using tax havens with bank secrecy to deliberately hide income and assets offshore.
Steve Baker
Do you track and record all the whistle-blowing that comes to you?
Jennie Granger
Yes, we do. We have about 100,000 calls to our tax prime line. We track them. We use it. Some of them become sources to us and we have very strict health and safety requirements around confidential informants. Obviously we do not want to go into detail but we can.
Steve Baker
Thank you. You have answered the question I was going to ask next.
Mr Ruffley
Ms Homer, just going back to our friends the intransigent French. HMRC put out a press statement that said records show that since 2010 HMRC asked the French on several occasions for permission to use the data for purposes wider than tax collection. Can you tell us: were those requests in terms of waiving the restrictions in the international agreement?
Lin Homer
They were requests to expand our rights to use the data. So, to go back to where I started with the Chair, we received the data from the French. We had strict requirements to use that for tax purposes. We had a series of discussions with them about utilising it more widely. I should be clear, we have not just said, “Please?” and they have said, “No”. They have wanted us to do it in a very sort of particular way, “If you bring us an individual case and you tell us which law enforcement agency might be interested in it, then we will consider that by handing it over to the relevant department”. So the difficulty for us is when you are looking at 6,800 lines of data—
Mr Ruffley
But did you proffer any cases?
Lin Homer
It is very difficult because if you cannot share the data with a law enforcement agency you do not know whether they want to know more about it, so we have been pushing to say, “Look, this is in places very rough data. It is very incomplete. We need to do some data matching with our colleagues. We need permission to share everything we have with our law enforcement colleagues” and it is that permission that they have now given us. So, yes, we have had lots of discussion with them. I would not use the word “intransigent”. I just think they have different requirements, constitutional and cultural, and they were not prepared to budge on those until more recently, and I suspect not the least because they can see that much of the data that they have has now been placed in the public domain in other ways. So those have been ongoing conversations from when we first received the data. If it is possible, Chair, I would like to make the simple point that we got a lot of data. We identified about 3,200 people from that data. We pretty quickly identified that two-thirds of those people were compliant, and I think it is really important to say that not every line of data we got showed us people who owed us tax. I know there has been some debate about, “Why would you ever have a Swiss account if you were not trying to cheat the taxman?” but there are reasons. On those people we believed owed us tax I think we set about checking and validating that and getting the tax in very diligently. So to suggest that we have done—we have some really strong benefits from this data already, including £135 million in the exchequer, which there would not have been. What has been much more difficult, and I am sure we will talk about it, is pursuing prosecutions particularly against organisations in different jurisdictions on the back of the partial incomplete and stolen data that we had with no corroborating evidence, and when you get corroborating evidence sometimes that is the final bit that will allow you to make a prosecution stick.
Mr Ruffley
Understood. In terms of the unpaid tax that you have got back under the Liechtenstein Disclosure Facility, it has been reported that the penalties—so there is the repayment, there is interest on that payment and then there is a penalty on top—could be as low as 10%. It has been commented that you do have maximum penalties that you can impose of up to 200% of the sum in question. Why is this so low, 10%, in I am assuming these cases relating to the stolen files?
Lin Homer
Let me get Jennie to answer that.
Jennie Granger
First of all, there are two tiers of penalties under the Liechtenstein Disclosure Facility. For the tax years that go up to 2009 it was 10% and for tax years going forward from that it was 20% to 30%, so it escalated from that period. While it is on the lower range it is not out of step with a lot of international practice, so if I can use one against my own home country Australia, who ran a disclosure facility earlier this year, it was a 10% rate for them. Spain is 10%. Some, like Canada, have experimented with 0% for early disclosure and then a sharp escalation. I think it is true to say, certainly for us, that later disclosure facilities in later years, we have tightened this up more. The reason we have done that is—
Mr Ruffley
Sorry, “tighten up more” what do you mean?
Jennie Granger
We started to put higher penalties in relation to that more recently.
Mr Ruffley
What level? Higher to what level?
Jennie Granger
Well, for example, the Crown Dependency Disclosure Facility, which is running for a very limited period, is 20% and under the Swiss agreement it was between 20% and 40% of the account balance[1] basically in the formula. What you are seeing is as our ability to be able to gain data, to be able to find out from other means and knowing, as I said, the Common Reporting Standard is coming as well, we have been able to make this tougher and we will continue to do that. At the time that Liechtenstein was agreed, Revenue authorities really did not have much ability to be able to flush out the data that would help them tackle actual evasion, so it was basically to encourage as many people as possible to come and disclose but, as I said, as time has gone on we have been able to escalate these and make them tougher.
Mr Ruffley
Would you accept that the Liechtenstein agreement will be essentially applied to cases where the taxpayer is sophisticated, if I can put it that way? It isn’t Mrs Miggins with her income tax. It is people who are attempting to gain the system.
Lin Homer
No, but if you look at our domestic disclosure, we have a very similar approach, which is basically that if you come and tell us about something early under your own steam we will apply a smaller penalty. It will ramp up, if either we have to search harder to find you or if you tell us an untruth that we then discover to be an untruth. So for the people that have signed up through Liechtenstein, and indeed through the Lagarde List, they have all certified to us that they have told us everything. If we go back subsequently and discover in another investigation that to be untrue then the penalties take that into account. So this is the system we apply across the piece of encouragement to people to sort out their affairs, and it is because we are there to get the money in and of course we are also there to change behaviours and to change those as people go forward. So this is not a one-off and then you can return to what you used to do. This is, “Confirm you will then stay compliant”, and the third is to deter. We will do that by a range of penalties up to and including prosecution. That is our system and has been for about 40 or 50 years across the piece at home and abroad.
Mr Ruffley
That is helpful.
Lin Homer
Abroad it is much harder to get the evidence. That is the difference.
Mr Ruffley
Of course. Mr Troup, did you want to chip in?
Edward Troup
Only just to say that that is codified in the Finance Act 2007 and what we have under these offshore disclosure facilities is completely in line with the penalties set out in statute and the range of penalties for all disclosures and all offences.
Mr Ruffley
Staying with you, Mr Troup, have you read the former DPP Lord Macdonald’s opinion?
Edward Troup
I have seen reference to it in the press.
Mr Ruffley
Right. He makes a criticism of HMRC where he says that evidence already publicly available suggests that HSBC should be prosecuted under the 1977 Criminal Law Act for its part in systemic operation to deprive HMRC of revenue. Is that something you are worried about?
Edward Troup
I will pass across to Jennie, but the reference to evidence is clearly interesting. If he has something more than he has read in the papers obviously we would like to see it but—
Mr Ruffley
He said evidence already publicly available.
Edward Troup
I think Jennie might want to say about the quality of the evidence that is in the papers.
Mr Ruffley
Jennie, can you just—
Jennie Granger
Yes, so a number of things. First of all, we are talking about HSBC Swiss and, as you would appreciate, there are issues about: it is domiciled in another country. What we had was intelligence not evidence. We had stolen data. It was broken. It was old, so its quality was not particularly good. Of course we talked to the Crown Prosecution Service about what was needed. We had our very best criminal investigators working these cases to see what we could prove and what we couldn’t. But it is very difficult. We are also dealing with a jurisdiction that would not co-operate on stolen data to give us corroborating evidence.
Mr Ruffley
Understood. I just want to touché on the UK-Swiss tax agreement. You are allowed to make 500 requests per year, aren’t you, to the Swiss authorities on named UK taxpayers?
Jennie Granger
Yes.
Mr Ruffley
How many requests did HMRC make in 2014?
Edward Troup
We did the full 500 for the two years, so in calendar 2014 we did 1,000.
Mr Ruffley
How many of these were successful in identifying tax owed to HMRC?
Edward Troup
There are a number within that that we are taking forward investigations on. I don’t know whether—
Lin Homer
13%[2], around 65 of those cases was a hit.
Mr Ruffley
A final question: the number of requests HMRC is allowed to make depends on the proportion of its previous attempts that are successful, as I understand it. What is the rationale for that on a performance-related allowance? Why did you sign up to that?
Edward Troup
As I said, the Swiss agreement was a ground-breaking deal. We got an upfront payment of £340 million from the Swiss banks. Indeed, you heard HSBC referring to their share of it. It was a difficult negotiation. I was not part of it but I heard of the difficulty with negotiation. We were very insistent on the ability to make name requests. Initially the agreement provided for between 100[3] and 500. I personally went over and met Swiss counterparts in 2013 of 2014 and got them to agree to put that at the maximum end of 500, but it was a difficult negotiation. We also wanted to maintain the flexibility that if in fact we got a very high hit rate from that 500—because their view was that with named requests we would not get a high hit rate because their assertion that they were compliant and the Swiss agreement was picking up people, that they gave us the flexibility to go back and talk to them to allow for an increased number of requests in future years. We will be having discussions with them in 2016. It is not realistic to have that before then because it does take time for us to work through the 65 and anymore that we get, which Lin has referred to, but I would also add that the Swiss agreement is coming to the end of its life because as we move into the Common Reporting Standard, and the Swiss have signed up to that in 2018, we will and we have already initiated discussions with the Swiss as to how we transition from the Swiss agreement to the Common Reporting Standard in three years’ time.
Mr Ruffley
That is very helpful, thanks.
Mr Love
Ms Homer, you indicated earlier on that you had collected £135 million from the Swiss HSBC list but that was in tax interest and penalties. Can you give us a breakdown of all three of those?
Lin Homer
Broadly, sorry, I tried to do that. Around £120 million of that is the tax and interest and about £15 million of that are penalties, but that is broad. Most of this, as Mr Ruffley said, was through disclosure facilities. As you heard, pretty much all of this is pre-2008 and, therefore, it is at that lower end of the penalties through the disclosure facility.
Mr Love
You didn’t disaggregate the interest from the tax, to give us a pure taxation figure.
Lin Homer
No, because it is just a question of how many years that tax covered rolled up. So in a sense it generates exactly the same figure as the tax would have if it had been paid at the right time.
Mr Love
Can you give us any estimate of the amount of tax uncollected?
Lin Homer
We have about 100 cases from the Lagarde List still outstanding and we think a few more million to come from that, and we think we have the tax that was due. What we have not tried to estimate, because it is a little bit more difficult to say, is what level of ongoing tax we are going to receive as a result of these people now being compliant for the future, but I would estimate that there are many 10s of millions in that category as well. We have a little bit more to do but we have pursued everybody that we believe owes us tax.
Mr Love
What I have been trying to get at, and you have probably worked this out, is some percentage of the tax that was due that had not been paid until this list came to us. That is a percentage of the total tax. Sorry, I have confused you. What I was looking for was the amount of tax collected as a percentage of what you thought was the overall tax that was due to be paid.
Lin Homer
We broadly think we have it all apart from the 100 cases we still have to do. We do not have a view that we have lost any significant amount. I am not going to say that down to the nearest pound but I have said in a number of Select Committees we go after the taxes due. We think we have the taxes due. We do not do deals on this kind of thing, so once we were in a disclosure environment, and we knew what the assets were, and then we charged the tax that was due and that is our approach.
Jennie Granger
If I can add to that also, in this case we believed from the evidence we saw that about two-thirds of the people we looked at—
Mr Love
Were compliant.
Jennie Granger
Were compliant. However we continue to monitor—
Lin Homer
Yes.
Jennie Granger
—and they are aware of that. So if indeed—
Lin Homer
So if we have missed anything we will be back.
Jennie Granger
Yes.
Mr Love
In the figures given to us—I think you announced to the Public Accounts Committee—there were 130 cases. I think you would call it just over 100.
Lin Homer
Yes, there are about 100.
Mr Love
Cases still to be dealt with.
Lin Homer
Exactly.
Mr Love
Can you give us some idea of what you mean by “being dealt with”?
Lin Homer
We are still working out how much tax is due before we agree a settlement. They are underway. This was a lot of data. It wasn’t in very good shape. It took us probably the first half of 2010 to set ourselves up to do it, but the bulk of this money had been banked by mid-2012. Almost inevitably the final bits are the bits where perhaps the data is even less clear and it takes you a little bit longer to work out what you are looking at and to reach agreement. So this is just the finishing off in a sense of the final cases. I think this is an approach that is very similar to that that our colleagues have pursued. I think the French have themselves said that they believe they now have most of the money in. They have almost done it the other way round from us and they are now considering around 50 prosecutions. We looked at around 150 cases and ended up actually three going to the CPS and one being successful. But I imagine that they now similarly think they are down to their last 50 or so, so I think we are in about the same position.
Mr Love
Obviously your primary focus here is getting the taxation in, but what priority are you giving to prosecutions or other actions?
Lin Homer
Yes. I had a good look at the governance around what we called Project Solace. So this was an operational project. It was under Jennie’s predecessor, Mike Eland, who I have no doubt will have appeared in front of you. I have to say I am impressed by how they went about this. They put together a strong team. They were made up of significantly well experienced people, largely criminal investigators. They had very strong data management. We have some of the best data analytics in tax administration in the world, and there was very strong governance of the cases. So it was a strong governance board. They set about dividing the cases into those they thought were most serious. So we looked at the cases we thought were most likely to be criminal and we put those in the hands of our most experienced investigators. Now, I have looked—
Mr Love
Is this a preparation for telling us that you do not think there will be any more successful prosecutions?
Lin Homer
No, I do not think there will be many, of individuals, because I have looked at what they in and about 1,200 of the cases. So in the end slightly more than the number we think owed us tax was reviewed within our criminal and special investigation. I actually got one of the criminal investigators to come to talk to me about how she did that. She has 20 years’ experience. She takes criminal cases all the time. That is what she does. Jennie’s team have done around 3,000 over the last couple of years. There were specific criteria, our normal criteria backed up by some particular criteria for this project. Each of those cases was looked at by an experienced CI person. Having looked at all 1,200 they identified 150—
Mr Love
You are beginning to depress me because I think you are leading to a conclusion.
Lin Homer
Because the evidence for prosecution is very high.
Mr Love
I understand that, but let me put to you a back of a fag packet calculation I made. You took 20 cases of which we have had one successful prosecution.
Lin Homer
Yes.
Mr Love
But there were 130 other cases that you are now looking at. If you work out that one in 20 cases have been successful, then you should have a success rate of six or seven for the prosecution but it doesn’t sound to me as if that is going to happen in this instance.
Lin Homer
No, because it is actually one out of 20 that were the strongest cases not—
Mr Love
So the other 130 are much weaker?
Lin Homer
They are part of the general 1,000, not part of the 150 we thought were most likely to be criminal. That is absolutely right.
Mr Love
Let me ask you the obvious question that arises: is this because of weaknesses in the law or weaknesses in the data with which you were provided?
Lin Homer
It is because of weaknesses in the evidence. Just to put this into context, we have a strong success rate of prosecuting generally. About 80% of the cases we take we get a prosecution. So I am confident that my criminal investigators before interaction with CPS know the standard of evidence they need to get a case across the line. If you have gaps in the evidence, if you have an inability to get third party evidence to support data that you cannot audit back to a key source, then you will not succeed.
Mr Love
Well, let me ask you the very obvious question that arises from that. You are telling us that there is now a much firmer international regime that will allow you to be able to prosecute more successfully. What attempts have you made and how much resistance are you receiving from the French and Swiss authorities to provide some of the greater evidence necessary to carry through prosecutions?
Lin Homer
I think in relation to the Swiss authorities they were clear they were not going to collaborate on stolen data, and the Swiss banks are operating under laws that allow for secrecy. So there was no jurisdictional space for us to get or expect collaboration in that quarter. We certainly did look for third party data. You may recently have read about a French case that is before the courts at the moment where part of the information for the prosecution comes from the Lagarde List, just as our prosecution did, but where there is third party corroboration; in that case wire tapping. What I think we needed in the individual cases is we needed supporting evidence to back up, as Jennie has put it, kind of indications of criminality that we got from the Lagarde data and that was simply not there in many cases. Of the three we presented to CPS—so we were hopeful of three—their view was only two[4] of those reached the standard.
Mr Love
A final question. In a sense it is a statement, but have you made it clear to the Swiss authorities just how appalled the British public is that there has only been one successful prosecution out of 1,100 possible prosecutions, and that the secrecy in the Swiss banking system reflects very badly on them and our ability to hold people to account for tax evasion?
Lin Homer
I think our Government has been at the forefront of the international conversations about stronger international collaboration. So I do not think there is any doubt about that. But what I would say is we have also made it clear to other partners that we are willing to work with them. It is not simply the Swiss secrecy, it is always a question of having a good evidential trail and certainly, as a lawyer myself, I have to say I am happy that we live within an environment where the standards for criminal prosecution do set a very high bar for evidential requirements. But it is one of the reasons why we have broadened our civil penalties, so we are not in a position where if we cannot get a prosecution we stop. I talked with other Member of Parliament about the sense that you have to deter. Of course you have to deter but over recent years we believe we have added significantly to our ability to deter. So there are cash penalties. We do now name people who have breached our rules. We have set up systems that make it much, much more punitive for you if you do not come clean early on. Our view is that a law enforcement agency will always want a range of civil and criminal procedures at their beck and call; because you will never meet the threshold you want for all of the people that break the law. The police don’t, and what you need to be able to do is to pragmatically cover the ground and in this case we believe we have done that. People have paid the tax that was due.
Mr Love
Can you be confident with this Committee, and indeed with Parliament generally, that all of these new abilities, civil regime, strengthening the law, giving you new powers and new international agreements, will mean that, when you come before committees or before Parliament in the future, you will be able to present a much more positive picture about taking action against those that evade paying their taxes?
Lin Homer
I am very confident that the powers we have been given are already allowing us to be much more successful. So, let’s be clear, our ability to bear down on avoidance and our ability to bear down on evasion are stronger now than they were even a few years ago. I am confident that with some of the new powers we have recently been given, and indeed with our stronger resources in Jennie’s area, we have around about 30,000 people in our business who spend their time pursuing compliance and I think we are already in a strong position and I am confident we can strengthen that further.
Mark Garnier
Ms Homer, can I talk to you about your relationship with the Treasury in terms of what your remit is in terms of what you are trying to achieve. The first thing is you are not a ministerial department so you do not have the same relationship with Ministers as I understand all other departments have. Can you expand on that?
Lin Homer
Yes. We are a non-ministerial department and the reason for that is I think this mirrors the arrangements for our legacy departments, for decades, probably centuries for at least Customs. What that means is our operational obligations are our responsibility—mine as accounting officer and my colleagues as commissioners. We are also operationally bound to maintain taxpayer confidentiality. That arrangement is so that people can be assured that their individual tax arrangements are not interfered with in any way by the Government of the day. Nonetheless, we do get a remit letter from the Chancellor of the day and that generally obliges us to deliver in areas that are important for the country. So in recent times that has covered increasing yield and reducing the tax gap. It has covered bearing down on offshore evasion, which is one of these areas. So there will be flavours but the issue about how we do that and the operational decisions is entirely for us. I think and hope that that is what successive Governments think is the right balance.
Mark Garnier
I would certainly agree with that. To that end then we are looking at the difference between tax yield and prosecutions and all this kind of stuff. So what at the moment is your main remit? Is it to maximise tax yield or is it to—
Lin Homer
Yes, so there is a kind of core remit for a tax administration, which is to get the money in and it would be odd if it wasn’t. But an aspect of our remit letters over the last five years has been about bearing down on avoidance and evasion, and so we received specific investment to increase the number of prosecutions. I suspect Jennie can probably more rapidly give you the figures than I can, and we have.
Mark Garnier
So this is criminal prosecutions or civil?
Lin Homer
Criminal prosecutions have increased fivefold over the period of this Government.
Jennie Granger
Yes.
Lin Homer
We get to decide which cases we take, and you will understand—
Mark Garnier
Let me be absolutely clear about this. There would never ever be a case where a Minister would identify a specific case to be prosecuted?
Lin Homer
No.
Mark Garnier
So they would say—
Lin Homer
Do more.
Mark Garnier
—“Do more prosecutions” and they have done.
Lin Homer
And then Jennie’s criminal investigators are the people that will decide within a published strategy what we are trying to achieve, and that is a mixture of tax yield and deterrents and it would always be so.
Jennie Granger
Just to be very, very clear, they are specialists, they are certified, and it is their decision to refer that through to the Crown Prosecutor who basically then makes the final decisions obviously whether to charge someone or not. The Crown Prosecutor does it on the basis of both meeting the evidential bar and public interest as you would know. But it is a limited delegation to specialist criminal investigation experts. Not me, they work for me and they work within our guidance.
Mark Garnier
So again you are delegating further down the line?
Lin Homer
Yes, Jennie doesn’t get to say to them, “Do that one and not that one”.
Mark Garnier
That is very interesting and very helpful. The other thing I wanted to look at was this idea of yield taking precedence over prosecution but let me unpack that question. What is the best interest of the British taxpayer in terms of gathering in tax? Because on the one hand it seems that you have the ability, potentially, if there is £1 of evaded tax to turn that into £3 worth of yield by exercising the maximum penalty or the Liechtenstein Disclosure Facility, which has been used in this case, which obviously has a much lower penalty, or you have the choice to take through a prosecution. But presumably, if that does not work then the person effectively gets off scot-free because you cannot then go back again and do a civil prosecution, so how does that work? So what are you trying to achieve when you are assessing this bundle of wrongdoers?
Lin Homer
There will be a balance. We are trying to get the tax in. As I say, it would be fairly silly to have a tax administration that did not do that. We are trying, however, to impact on behaviours now and in the future, and a significant amount of the work that we do, again, both onshore and offshore, is about enhancing people’s understanding of what they are required to do—back to Mr Baker’s point about simplicity—but also getting them to understand the consequences of what they do. The full range of that activity will be from what Jennie’s people will call our “nudge” activity. So we will write letters out to people saying, “People like you—this might be a medic or this might be a small business person—normally pay their tax. You look like you are not being as compliant as your peers” and we have hard evidence that nudge letters change behaviour. So we do that because if we can increase the voluntary compliance; the vast majority of our tax comes in voluntarily or almost voluntarily with just a little bit of a nudge. But as we go along that line if we have to shove more fiercely we will shove. One of the things that we have to work out is how much is enough to make people think that we are close enough to catching them to act as a deterrent. So you will have hopefully seen our campaigns on your trains, of our eyes looking at you. You will recently have seen them suggesting to you that our use of data will mean that we are watching you. So just over the last year we have acquired the right to match what we call “merchant acquirer data” and so we can say to a small business person, “What you are telling us does not line up with the information we are getting from other sources, including your credit card receipts”. So we use the whole gamut to bring the money in, deter people from choosing to be non-compliant and nudge them back into compliance and punishing them in a variety of ways if they are not. We think you have to keep a balance, including in a way your spotlight moving. So our campaigns will tend to be focused on particular sectors or particular sorts of behaviour, so that people have a sense, as our posters say, that “We know you well. We know where you are. We are coming to ensure that you do things properly”.
Mark Garnier
One of the things that have come out of this is that a lot of people have been angry over the fact there has only been this one prosecution.
Lin Homer
Understandably, we like people to pay their tax.
Mark Garnier
Of course you do. There have been potentially civil prosecutions, which is an interesting debate: do you go for the full 200% fine or do you run the risk of not getting it at all. Clearly it sounds like, when you are going through a prosecution, although it takes 44 months a lot of that is to do with deterring other people. In the case of this Swiss one, because it is such a big story and people are looking at it, it almost comes over as, “Well, actually, it has gone completely the other way. You can have an offshore bank account. You can not declare it and, generally speaking, you have one in 1,100 chance of being prosecuted”. Now, from what you are telling me that is not the case. Do you want to respond to that?
Lin Homer
We can certainly give you some more examples. We have 48 million taxpayers at any one time; 4.5 million small business people. I have told you that we have significantly increased the number of our prosecutions. I could give you examples of small businesses as well as wealthy people that we have prosecuted, but that is not the only way that we persuade people to pay their tax, and we certainly have found that naming people who have defaulted, naming schemes that we regard—
Mark Garnier
Can you name them under a civil prosecution?
Lin Homer
Yes.
Mark Garnier
You can, okay.
Lin Homer
Naming schemes we regard to be high risk and you will have seen that we think there has been a reaction to that and that, for instance, aggressively marketed avoidance has moved from mainstream advisers to boutique advisers. I think earlier you heard representatives of one bank, and we have seen others, moving out of fields that back in the 2000s they were all in. So we think we are seeing significant changes in behaviour and definitely we are seeing the tax gap trend downwards. Now what I think we have to keep deciding is where do we need to put our focus on compliance? But we would much prefer to try to help people be compliant than prosecute everybody, so if we can get people by system, by advice. We have some stats that show that if we help small businesses get well established in their first three months they are hugely more likely to stay tax compliant. So part of this for us would be the tax webinars we do with small businesses. We talk to thousands of small businesses about how to set their business up, ideally to keep them in that space not to have to chase them into a prosecution.
Mark Garnier
Just to be absolutely clear, these are decisions that you make given the overall remit that is passed to you by the Chancellor who says, “Maximise tax receipts”?
Lin Homer
Absolutely, and taken by experienced people who know what makes a difference to bringing the money in.
Mark Garnier
Fantastic. Thank you very much.
Jesse Norman
Thank you for coming in. Ms Homer, you persisted in adopting HSBC and other organisations’ language about this information being stolen. Do you really think that it is stolen in the sense that—
Lin Homer
It definitely was stolen but, as Jennie has said, we will use data from whatever source.
Jesse Norman
It is not stolen in the sense of you are trafficking in stolen data?
Lin Homer
We did not pay someone to go and steal the data and that is what we rightly are saying we would not do.
Jesse Norman
But you are not prepared to make the move to say, “Actually, this is rather valuable public service”. You want people to be spilling the beans on this aggressive tax avoidance—
Lin Homer
To be honest, we would prefer big organisations to give us better data.
Jesse Norman
Yes, that is avoiding the question of course. We know that. That is what Mr Flint said. He said, “We would like to do it better ourselves”. That is now what we are asking you. We are asking you: you get information, do you want to encourage it or not? You do, surely.
Lin Homer
We have taken it and we have used it. Jennie has mentioned we get over 100,000 bits of information and, let’s be clear—
Jesse Norman
I understand all that. That is fine. We are rehearsing ancient history.
Lin Homer
—all of that comes with a variety of circumstances.
Jesse Norman
You have now signed this agreement on 23 February, this French agreement.
Lin Homer
Yes.
Jesse Norman
Could that have been prompted by the public outcry over tax avoidance or was that purely coincidental?
Lin Homer
I have described that we talk to them regularly. I have a personal view that there is a degree to which they now can see much of this information in the public domain from other sources, and that may cause them to feel that they should think again. But Edward may want to emphasise. They do have strong laws in place in France about how data is held.
Jesse Norman
The difference was not that the law changed. It was that the public context; the politics changed.
Lin Homer
It was their rules.
Edward Troup
No, the politics is the wider circumstance. It became known publicly that this information was in the public domain. It has not been shared in the sense that I cannot download it on the internet, but it became known it was out there. The international committee—
Jesse Norman
But, Mr Troup, it has been known to be in the public domain for some time before 23 February.
Edward Troup
No, the fact that it had been stolen was in the public domain. What happened a few weeks ago was that the actual data started being leaked into the public domain, and I think if you were asking the direct question: did this have an influence on our discussions with the French and their willingness to give us the agreement that we have been seeking? I think it did. But I did not say, “Why have you suddenly agreed?” We were delighted having had a lot of engagement that they agreed.
Jesse Norman
I understand. When you got the original information why didn’t you tell us at that time about the restrictions under which this was operating, the way in which your hands were tied, the fact that it was of poor quality and the fact that it was gappy? Why didn’t we hear all about that at the time? Why did you allow public expectations about the value of this information to run ahead in the way that they did?
Lin Homer
I have done a little bit of looking back at what we said and where we said it and I think we were fairly clear about this in all the discussions. So the amount of money that we have got in I don't think in any sense has been significantly out of kilter of our expectations. When colleagues from HMRC talked about this—
Jesse Norman
You always thought it was £150 million to £250 million or that kind of number?
Lin Homer
I cannot find an estimate, which might be the more sensible way to go about these things but there is no suggestion that we had a significantly different expectation. In the early discussions before Select Committees—I think including this one—there was always reference to 6,000 lines of data. I think we fairly rapidly moved to discussing that we thought that was around 3,000, 3,200 people. I think very early on we talked about prosecutions and said we were looking at around 150. I think it was also said very clearly early on that we expected a significant number of people—
Jesse Norman
You did not mention the restrictions as I recall. I do not recall a—
Lin Homer
I think we did. I think we were clear that we had this for the purposes of being a tax authority.
Edward Troup
If I can come in because, Mr Norman, I think you are suggesting that we should have said there were restrictions, some of the data was scrappy, it is not very good. I am not sure, coming back to the previous discussion, that if we want to deter people we want them to fess up voluntarily, going out and saying, “Well, we have some information but it’s not very good” is the right way to do that. So I cannot recall whether we did mention the restrictions—
Jesse Norman
It is not absolutely clear. I am not sure that is true because of course you do not know whether you had good information or bad information, so what you know is information is in the domain and the Revenue are pretty picky about what constitutes good quality information.
Edward Troup
But I do think we have to be careful not to share in the public domain everything we have, and although there has been a lot of focus on this data, there are a lot of other sets of data that we have had that we are using.
Jesse Norman
That is a reasonable position. Ms Homer, you have talked just now in response to Mr Garnier about the efforts you have made to crack down on aggressive avoidance. Now did you see the previous session?
Lin Homer
I listened to it, yes.
Jesse Norman
All right, so we do not need to personalise this to Mr Gulliver but it is perfectly clear that Mr Gulliver is an example of a certain kind of posture, which my colleague Mr Kane described as being at the outer limits of aggressive tax avoidance. That is to say someone who is able to pursue his life in this country for 12 or 13 years so far, potentially 20 years or more in total, able to enjoy the benefits of living in this country, able to use a house, kids go to school here, all the benefits of that, and yet be resident in Hong Kong, non-domed in Hong Kong by the end of that time for 40 plus years. So my question is this: how on earth can this have been allowed to happen? Why isn’t this a tremendous indictment of the non-dom rules that you have? How is someone like Mr Gulliver able to achieve this status of being essentially offshore to everywhere except the lowest tax domain that they choose to pay tax in?
Lin Homer
Chair, you know well that my first comment is going to be that we will not discuss individuals.
Jesse Norman
Someone like Mr Gulliver. I am not asking you to discuss Mr Gulliver, just someone in that situation.
Lin Homer
Yes, I know, I always I am afraid will preface that. The second—
Chair
I think it is a question about the non-dom status.
Lin Homer
Yes. So the second thing I will say is that as tax administration we apply the rules that Parliament sets and, if those rules apply, then we collect the tax that is due. I cannot collect the tax that people wish was due and that is not my job. Our rules around non-dom and many of our tax relief rules are well understood and we think are well applied.
Jesse Norman
But we can be rationally certain that your people will have gone back, closely interrogated someone in that position’s situation and that if in fact you now subsequently discover, as you go back and look at it, that it was not compliant, their entire tax position would then unravel, would it not?
Lin Homer
We have many specialists. We have talked about Jennie’s specialists. In specialist personal tax we have a group called the high net worth group. They customer-relationship manage our most wealthy people in the same way that large business tax customer-relationship with the big multinationals. Some of the most significant cases with individuals are effectively man-marked in just the same way our multinationals are, and they have some of our most experienced tax professionals alongside. We have seen more work in those areas in the last few years than we traditionally did, as we have received extra resources, and we have seen more yield from those areas than we did. One of the things that I have said, and am quite happy to say again, is that I do think individuals need to take responsibility for their own decision-making, but some of the things that we do in the counter-avoidance space is making it harder and harder for people to say, “I didn’t realise what I was doing”. I am confident that we exercise our responsibilities in that space very well.
Jesse Norman
Let me ask a final question, if I may. Of the 3,600 entities that came out of HSBC Suisse 2,000 of them were found to be compliant with the tax rules?
Lin Homer
Yes.
Jesse Norman
How many of those people were compliant because they had non-domiciled status?
Lin Homer
I do not know. There will be a whole variety of reasons why those people were compliant and it is not an issue—
Jesse Norman
Of that whole variety, how many—
Lin Homer
It is not an issue for me and it is not something I would feel I needed to share with you, I am afraid.
Jesse Norman
Sorry, you are suggesting we do not have a right to know what percentage of that number was non-domiciled? Why would that be?
Lin Homer
I think the policy of non-domiciled, there is general information about the numbers of people subject to those rules in the public domain and we would—
Jesse Norman
But this is not specific information about individuals. We just want to know. You have told us it is 3,600 and 2,000. How many of them are non-domiciled?
Lin Homer
I do not think it is necessarily information that we would have gathered and so I suspect that if you ask—
Jesse Norman
Why have you not gathered it? I think you should gather it, and I think you should write to us with a number.
Lin Homer
Because I do not think it is relevant to our decision about whether they owed tax.
Jesse Norman
No, but it is relevant to your judgment about whether or not non-domiciled status is being abused or the extent of it. You are not—
Lin Homer
My judgment is whether or not I am seeing abuse. If I am seeing our tax laws properly applied and those are discussed and debated in Parliament and put into effect then I do not think it is for me to answer a question about whether a certain level of usage of that in relation to this data indicates abuse.
Jesse Norman
If I may say so, I do not think it is necessary for you to substitute your judgment about what Parliament should be inquiring into, when these matters are general matters that relate to policy to set in Parliament.
Lin Homer
We publish information about non-domiciles.
Jesse Norman
No, I am asking you to add to that information here as to how many of those people are non-doms.
Lin Homer
I do not think that is available within our systems without me going back and reviewing the 2,000 cases.
Jesse Norman
Right, so I am asking you to do that. Why can’t you do that?
Edward Troup
Can I come in? I think that the simplistic question, “Is someone compliant because they are a non-dom?” is not really capable of being answered. In relation to a particular individual there will be a whole lot of circumstances: their residence, their non-dom status, where they have held their money, whether they have remitted it to the UK. I have not looked at any of these cases, but I imagine that among the compliant ones there will be some non-doms, but they will be compliant not just because they are a non-dom but because they have also earned their income in particular places and they have paid tax on their income in particular places. Equally I am sure that among the non-compliant ones that we have settled with there will be ones who are non-doms who are entitled to claim effectively exemption from tax on money until it is remitted, but may have remitted it without declaring it to us. The question comes very close to asking for a breakdown of the individual circumstances of the 3,000 people—
Lin Homer
Or the 2,000.
Edward Troup
—that I genuinely think would be both difficult to do and—
Lin Homer
Dangerously close to breaching the Act.
Edward Troup
—inappropriate for us to disclose.
Chair
There are two grounds that you are giving for not providing it. One is appropriateness and the other is practical.
Edward Troup
That are linked.
Lin Homer
But I am happy to remind you where we publish information on this.
Chair
I think it might be helpful if you drop us a line expanding in some detail on the point that you both made, particularly the last point, because that is really the heart of the matter on which we as Parliament will need to form a judgment.
Lin Homer
I am happy to do so.
Jesse Norman
Could I add just one sentence? To that letter I would be grateful if you would add the justification as to why you are able to take the view, Ms Homer, that it is not for Parliament to make this inquiry. That is a different matter. You can say it is hard to get this information. I want to be sure that that is included in your letter.
Chair
I think you have heard what was said there and in due course we will get some correspondence.
Lin Homer
Yes, I will try to be clear.
Chair
I want to take you back to an earlier point that Mr Norman made, Ms Homer, about the treatment of whistle-blowers who themselves use criminal activity in order to engage in whistle-blowing, that is to steal data in this case. What is an individual in a bank, for example, supposed to do if he or she is confident that he will be sacked if he blows the whistle? Should he see what he considers to be uncollected and probably evaded tax?
Lin Homer
I think this will depend on the jurisdiction. Many countries, including the UK, will have specific provisions and protection for whistle-blowers and certainly in the case of the UK those protections are clear and well written down.
Chair
What about the Swiss jurisdiction?
Lin Homer
It is difficult, because obviously it is in the public domain that Mr Falciani was being pursued by the Swiss. He did not whistle-blow to us.
Jesse Norman
That is not true—
Chair
Jesse, really. You must allow the witness to speak.
Lin Homer
He was, I think, originally arrested by the French on request from the Swiss with regard to a desire to see him extradited and I think a judgment was made not to follow up on that because the nature of the data was felt to warrant further investigation. I think that illustrates that the overarching rules of Switzerland did not lead to the outcome that they desired.
Chair
It sounds as if this issue, the issue of some safe haven for whistle-blowing across jurisdictions, must form an essential part of negotiations to try to secure uncollected tax.
Lin Homer
I think the common reporting standards in a sense try to oblige everybody to follow a more appropriate standard of disclosure.
Chair
Perhaps you might like to come back to us on the specific whistle-blowing point in the different context. The Commission on Banking Standards also developed a new set of rules, some of which are being implemented.
Rushanara Ali
Can I just follow up on a couple of points that were raised earlier on? You had an extensive discussion about non-dom status, the broader point, and my question to you is, given you are alluding to the fact that there are some sensitivities about disclosing data, what part of it is to do with the legislation and what part of it is to do with other matters, confidentiality and so on, in light of Jesse’s comment? What powers would be needed? If it is in the public interest for us to know how many people are non-doms who are part of this number, what powers do you think Parliament should be giving you in addition in order to fulfil that action?
Lin Homer
We have significant statutory limitations on our ability to share data and obligations to maintain confidentiality, which are longstanding and that would need legislative change. What we have been doing in recent years is seeking and getting support for changes in our legislative basis that allow some naming in increasing circumstances.
Rushanara Ali
So there should not be anything stopping you, given that you are already able to name some people, to give the exact numbers in that case?
Lin Homer
We have specific powers in specific circumstances to name deliberate defaulters, to name high risk promoters. Obviously when people go before a tribunal, either in civil proceedings or criminal, their details become known, so in a sense they make that judgment when they take the final decision of going to court. We have recently, just the week before last, put up a crime map product, so we list our prosecutions.
Rushanara Ali
So there is nothing to stop you. If you are able to name individuals there should not be in principle anything stopping you from giving us the numbers?
Lin Homer
No, we have to have a statutory right to do so, and I will write that to Mr Norman. The point is what we do not do is list compliant taxpayers, and what Mr Norman was asking was a question about compliant taxpayers, not non-compliant taxpayers. I just want to make the distinction. I wait to be told by Parliament.
Rushanara Ali
Do you know on his previous question how many of the non-doms were non-compliant and how many are compliant then in that group of numbers?
Lin Homer
I think I do because I think the question was clear. We believe two-thirds of these people to be compliant.
Rushanara Ali
No, I meant the non-doms, how many were compliant?
Lin Homer
The question was about how many of the 2,000—
Rushanara Ali
My question is—
Lin Homer
Well, you asked me about Mr Norman’s question and I do not think Parliament is close to asking us to share details about compliant taxpayers, so I just want to be very clear about that. On non-compliant taxpayers, even in that space we have to have a specific right to publicise and we do not publicise the many occasions when we reach a settlement with an individual taxpayer that says they owe us tax. I think my experience since I have been involved in the organisation is that Parliament wants and expects to see a good reason for doing that, and the reason that we would normally have is to have that talk, as I described earlier, and to be able to show that there are risks to the behaviour that is being undertaken. We do think about and we have been expanding the spaces in which we can put the details of non-compliant people in the public domain. I suspect that will continue.
Rushanara Ali
Okay. You have talked quite a lot about behavioural change and you have explained very extensively, and I think, rightly, about getting people to voluntarily give information and pay up voluntarily, and the nudge effect. Do you not think that the public, given what has happened with the HSBC scandal, the behavioural change for very wealthy individuals who have found ways of avoiding and evading tax, tax dodging, illegal activity as well, feels that there is one rule for very wealthy people who can afford to find ways to bend the rules, and have been supported in that case by HSBC, and that regardless of all the good work you and your organisation has been doing they do not feel that your organisation treats them in the same way? That is a perception and people feel genuinely enough effort is not going into going after people who are avoiding and evading paying large amounts of money.
Lin Homer
I do worry that that is the perception, yes, and I think one of the challenges—
Rushanara Ali
Do you say it is a reality as well, the disproportionate effect of the taxman going after ordinary individuals?
Lin Homer
I am absolutely sure it is not a reality.
Rushanara Ali
Well, let me give you an example.
Lin Homer
I would quite like to answer your last question first. The position that we are in is that there is quite a lot of not very well-informed debate about what we do, how we do it and about what other people do. One of the things that we have been trying to do over the last couple of years particularly is talk more about what we do. The reason for putting more of our information into the public domain is to say as strongly and clearly as we can that, first of all, we treat all taxpayers fairly and, secondly, that the approach we take is consistent across the rich individual, the less well off individual, the small company, the big company. What I do think tends to happen is that that story gets overwhelmed by some of the media and other reporting and I am not sure people realise that in relation to the Lagarde list that we believe we have got all the tax in. I think it has been quite hard to get that message over. It is a perception, I think it is—
Rushanara Ali
So you have got all the taxes in and there is nothing further to—
Lin Homer
Well, other than the 100 cases I talked about, absolutely. I think it is a real problem for us if that perception is allowed to go unchallenged, which is why I am being quite forceful. People have a right to know that we treat all tax avoidance and tax evasion seriously.
Rushanara Ali
Do you think you would be able to provide some evidence of the proportion of time that staff spend going after these kinds of cases, versus high amounts of money that are under investigation versus individual cases, because that is a genuine problem. Many of us will have examples. My most recent example, which is in the press, so I can share it with you, was an ex-serviceman—
Lin Homer
We put some information on—
Rushanara Ali
—who the taxman was going after because he had a part-time job. He provided the information, but there was some miscommunication along the way. He was on the verge of being made homeless. The taxman or woman rightly goes after people, ordinary people, where they have done something wrong, but there seems to be an over-zealous attempt at ordinary people, but people do not feel that is shared with wealthy individuals. That is a perception that needs to be corrected, so if you could give the facts about how much resource went into which group.
Lin Homer
I absolutely accept the real risk of that being a perception. I completely refute that that is the case and we have put—
Rushanara Ali
Do you think you would be able to provide some evidence?
Lin Homer
We have put information up on gov.uk last weekend, significantly because of my concern that if people only read the headlines, they do not get the information. Since April 2010, we have secured £100 billion more in compliance revenues than otherwise.
Rushanara Ali
Yes, I have seen that, Ms Homer.
Lin Homer
We have £31 billion—
Chair
That is not quite the question that Rushanara is asking.
Rushanara Ali
My question was the resourcing.
Lin Homer
—of that out of large business compliance—
Rushanara Ali
No, but that was not my question.
Lin Homer
—£2 billion of that from offshore evasion—
Rushanara Ali
I have read your notes on that, Ms Homer.
Chair
Hang on, Ms Homer, can I take you back to the question that—
Lin Homer
—£852 million from the richest—
Chair
Ms Ali, could you possibly go back to the question?
Rushanara Ali
My question, Ms Homer—and if you cannot answer it here, I would be very pleased if your officials or you could provide me the numbers later—what proportion of your staff allocation goes into going after high value, high net worth individuals who are dodging, evading, avoiding or accused of avoiding or evading tax and what proportion goes to others? You can do that, break it down by income; if we can have that.
Lin Homer
Yes, we can do it by behaviour. Yes, we can do it by behaviour. We publish it in the tax gap—
Rushanara Ali
Because you understand that is how we can build public confidence, and if there is an issue about resource allocation, then perhaps we can make the case to the Government—
Lin Homer
I am very happy to point you to our—
Rushanara Ali
—that you should have more resources to go after rich individuals who are not paying their fair share of tax. That is not everybody, but there are examples here that are deeply concerning to the public, so it should be taken seriously.
Lin Homer
If it is—
Chair
Hang on, Ms Homer. Have you finished asking questions?
Rushanara Ali
Yes.