Power to enter premises and inspect goods

Part of Finance (No. 2) Bill – in a Public Bill Committee am 3:15 pm ar 16 Ionawr 2018.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 3:15, 16 Ionawr 2018

As I said earlier, the Opposition are well aware that we need serious measures to tackle VAT evasion in this country. A National Audit Office report published in 2017 revealed:

“HM Revenue & Customs (HMRC) estimates that online VAT fraud and error cost between £1 billion and £1.5 billion in lost tax revenue”.

I referred to that figure earlier, but no one is certain that it is accurate. I also referred earlier to the fact that 14.5% of sales in Britain in 2016 took place online. I reaffirm what I said pretty unambiguously in my earlier speech: the number of online sales is growing and growing, so it is essential that we get to grips with VAT evasion. The picture has the potential to become more complex, depending on our direction of travel in relation to Europe.

We are absolutely clear that evasion is not acceptable and must be clamped down on. The National Audit Office report highlighted:

UK trader groups believe the problem is widespread, and that some of the biggest online sellers of particular products, such as mobile phone accessories, are not charging VAT” at all. It is therefore important that robust action is taken to address the issue before it creates an even bigger tax gap. We have already discussed the potential for that in clause 38, where we think the Government need to take a different approach.

That said, we have serious concerns over the scope of clause 46 in relation to that issue. The clause seems to give HMRC officials pretty wide-ranging and almost uncurbed powers to enter premises and search vehicles and vessels. There might be a civil rights issue regarding that power, and, as a result, the rules might be open to significant abuse. Although it is clear that action must be taken to tackle tax avoidance, we are worried that not enough thought and consideration are being given to the potential impact of the new powers. Indeed, this is evident in the Government’s own tax information and impact note on the measure, which was published just a couple of years ago, on 5 December 2016.

The delay here is notable, as this piece of legislation was originally intended for last year’s Finance Bill. It was postponed because of the general election and failed to appear in the Ways and Means resolutions once the Bill resurfaced. We have tabled an amendment to add a much-needed layer of security and protection for individual rights, while giving officers what they need to pursue suspicious vehicles or vessels and search buildings as necessary. As a result of our amendment, those actions would not be permitted if they did not satisfy the conditions usually needed for a search warrant. That would at least provide some judicial oversight and security for a procedure that could give HMRC and, potentially, other agencies carte blanche—I am not saying that they would do this—to abuse powers with no recourse.

The transformation of online retail in the UK in recent years has brought with it an unprecedented challenge in policing our ports and docks to ensure that customs law is complied with. As a Member of Parliament who has a huge port in my constituency, I appreciate that, but the Government are failing to allocate the proper resources to HMRC to enable it to supply enough officers to meet the challenge. Lack of resources is a running theme, and we are not making this up. The Government cannot substitute for those resources wide-ranging powers to interfere in the matters that I have referred to. This is before we have even considered the yawning tax gap brought about by the convoluted tax planning of major corporations.

Another recent report by the Public and Commercial Services Union spelled out how serious the problem is. In spite of the huge challenges we face in cross-border online trading and closing the tax gap—they should mean that HMRC is given more resources, not less—the PCS report shows that, year on year, there have been real-terms cuts to HMRC for more than a decade. Clauses 46 and 47 highlight two major failures on the Government’s part: a failure to consider the crucial question of how tax prevention activities connect to citizens’ rights and put in place proper safeguards to protect them, and a failure to resource HMRC.