Since getting married I say this less and less, but I know I’ll regret this in the morning. Nevertheless, here’s my exchange with a PhD student who wrote to me on the Direct Recovery of Debts. I’ve called him Adrian.
Sent: 11 July 2014 08:51
To: Jolyon Maugham
Subject: Some questions about Wednesday evening
I attended your discussion at the RSA on Wednesday evening. I am interested in the position you put forward as I am currently working on a PhD in Tax Policy and Jurisprudence at [DELETED].
If I understood your point correctly, you had identified a problem, namely a cost to HMRC in the recovery of “undisputed” debts. I use quotation marks as there appears to be some dispute over whether, in fact those debts are indeed disputed. Your put to the audience several times that if not direct access to bank accounts then what alternative?
In addition, you were of the view that the real question was not whether the administration ought to be able to take direct action against individuals in respect to the seizing of assets without necessary recourse to the courts, but rather, are there sufficient safeguards. You also suggested that the condoc implied some sort of court procedure in granting consent for this process.
Dealing with each of these points in turn.
1. Very often in practice, it appears that there are many instances of HMRC acting in error. The court procedure would, if applied correctly, eliminate or at least mitigate errors of HMRC prior to any attempt to seize assets. Whilst there can be little doubt that this procedure is more expensive to HMRC, isn’t the point of the court procedure to protect individuals from HMRC error making?
If it turns out that HMRC are correct in their assessment, those costs are recoverable through the county court procedure and therefore the costs are recovered or mitigated. I don’t believe you answered Keith Gordon’s assertion that it is only when HMRC make errors that the costs consequences are incurred, but if HMRC incur costs in those instances, it is correct that the taxpayer is protected.
2. Safeguards within the administration of government can only really go so far. They are applied by the administration themselves and therefore subject to a degree of assessment which, by its very nature, is coloured by the relationship between the assessor and their paymasters. My specific research looks at the GAAR, and in the case of the Panel, there are some real questions over the degree of independence given the direct recruitment of those individuals by HMRC itself.
Isn’t it the case that our legal system, providing an independent forum for the resolution of disputes between individuals and government provides the best possible safeguard against error or bias judgement? I wondered why you believed that an individual or group of individuals whose livelihoods or recruitment depended on one side of the dispute could possibly provide the same sort of protection than a court?
3. My final point relates to the cost or efficiency of solving problems.
There can be little doubt that direct access to individuals bank accounts would invariable reduce the perceived “gap” between the amounts of money HMRC believe they are owed and the sums of money they are able to recover. It does seem, however, that there are many ways in which the “problem” can be resolved but all of them must operate to preserve basic rights and protect the system of law.
The real point of the evening was to assess whether HMRC were going too far, not whether there was a problem – which it seems to me was widely acknowledged. There are many problems in society that could be addressed by a more interventionist government taking more aggressive steps to eliminate its perceived ills for society. We could, for example execute criminals because prison numbers are too high, we could engage in euthanasia because the elderly are expensive and a drain on NHS resources. Isn’t the whole point of discussions such as Wednesday to debate the holding back gray men in suits from exercising too much power, using the apparatus of the state, threatening people with seizure of property or imprisonment?
I am seriously concerned that the powers currently being proposed for HMRC, in addition to the ones they already have will erode basic freedoms within our country. I don’t believe that, for example the GAAR, permits anything other than a discretion for the administration to ignore Parliament – albeit they would need to convince a court of such a course of action (probably the reason why there are no cases at the moment).
I wondered how much faith you really had in the arguments you were putting forward when considering all that stands between us and creeping totalitarianism is the rule of law and a legal system that has until now been intolerant to demands from increasing discretionary power?
From: Jolyon Maugham
Sent: 11 July 2014 09:41
Subject: RE: Some questions about Wednesday evening
It’s absolutely my view that DRD is – with one or two modest adjustments to safeguards – a policy that we will look back on a decade hence with a degree of bafflement at the views many of us held about it on its proposal. I don’t accept much of your characterisation of DRD or how it operates but I guess there’s a prior difference between us. You seem to see the world in terms of absolutes and I, absolutely, see it in terms of policy choices.
I am not quite sure what you are suggesting about my views when you talk of executing prisoners to ease overcrowding or killing the elderly to ease pressure on the NHS. But to close your eyes to the effects on the NHS of narrowing the £4.4bn tax gap (of monies lost to the fisc through non-payment of tax debts) seems to me a rather odd way of looking at the world.
Two areas here; the Direct Recovery and the comments on the GAAR.
HMRC already can take action to recover debt which is not subject to Court or independent scrutiny. Virtually all forms of letters, phone calls and personal visits do not require judicial support. Distraint has procedures but I think the timescales are less than proposed in Direct Recovery. HMRC can refuse to repay or set off refunds against liabilities, and for PAYE employees it can reduce Tax Codes to recover underpayments. All of this only subject to the usual process of complaint or JR.
Of course HMRC makes mistakes – all large organisations or professions do that. But it would be bad policy making to use anecdotal evidence, or an uncritical use of numbers, to make policy choices. On that basis people would not enter hospitals for fear of MRSA, or HMRC refuse to accept Tax Returns without all the supporting accounts and paperwork simply because some accountants and taxpayers got it wrong.
On the GAAR I think we should remember that it was the independent Chair who recruited panel members, not HMRC, so I’m not sure why there might be concerns on their independence.
I’m also not clear on the point about GAAR and discretion. The GAAR panel must be consulted on proposed counteraction but they are advisory, not judicial. However if the matter goes before the Courts they must take into account the Panel’s opinion. If HMRC have erred then the Courts will, as now, be able to correct that.
The issue of few cases cannot be linked to discretion. The GAAR can only be applied to transactions entered into on or after the date of Royal Assent to the 2013 Finance Bill. As that was 17 July 2013 I think it highly unlikely we have reached the date where the relevant Tax Returns will have even been submitted.
I also, and quite separately, think your choice of examples was less than helpful and in itself demonstrates the need for evidence based policy making.
More from Adrian. It’s his tone, I think, that I particularly enjoy.
With respect, you are not answering my points. It makes no difference if we become used to living with creeping totalitarianism – the debate is about the extent to which creeping powers are necessary in order to preserve liberty. This makes your inital point irrelevant.
I certainly do not see the world in absolutes. Rather we are discussing where on the scale the line ought to be drawn and who should draw it – for me, that line ought to be mediated by law informed by democracy, not executive discretion.
In respect to your final point, I am suggesting that just because you have correctly identified a problem doesn’t mean you can use any available means to solve it. I think this is clear (and I suspect you do understand the point), not that you would advocate capital punishment or euthenasia.
I do not close my eyes to a £4.4 bn problem. I don’t think even on the best analysis DRD is going to solve that. The additional revenue it will bring in is a mere tickle under the chin of that problem and the proposed power to achieve that tickle is draconian.
Once HMRC get to feel comfortable with direct recourse – it will, like every other government power since William I, expand into all sorts of other areas until we are subject to the direct control of the executive and the administration.
When we abandon the courts because solutions elsewhere are expedient, we are open to abuse. Surely that is the message of 1215 and 1688 not to mention the experience of 20th century government power grabs in Germany and Russia? I think you will find they also found law rather inconvienent when trying to impose their administrative zeal in the name of “the people”.