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When I joined the Inland Revenue nearly 30 years ago as a trainee Inspector, one of the first things impressed on me was the vast importance attached to the Official Secrets Act. Nobody was entitled to look into the Revenue's files, not other Civil Service departments and not the police. Departmental lore insisted that this condition might not apply to cases of treason or murder, but that was as far as it could be stretched.
In one district that I worked in, the investigation manager developed a link with the local police force, but I have every reason to suppose that the traffic was one way: it was the police inspector who went out of the room accidentally leaving a file open on his desk.
We have seen some of that broken down with exchange of information between revenue departments, so that we now expect the Revenue and Customs to exchange information. Perhaps – as some people said at the time – that was the thin end of the wedge.
New powers
All of this is now to change. Under the new Criminal Justice and Police Bill, the Revenue (and Customs) will have the power to disclose confidential information 'for the purpose of any criminal investigation whatever which is being or may be carried out, whether in the United Kingdom or elsewhere'.
This follows a report from the Performance and Innovation Unit of the Cabinet Office called Recovering the Proceeds of Crime. This seems to favour both confiscating and taxing the proceeds of crime (though those might seem to be alternative strategies).
It is also proposed that the Revenue (through the new Criminal Assets Recovery Agency) should in future be able to raise assessments against individuals without having to identify the source of the income. Once again, this is aimed at those with wealth but no obvious source of that wealth: but how on appeal would you defend yourself or defend a client against such an assessment?
Crime fighting Government
All of this shows the 'high priority the Government attaches to fighting crime'. It might also be suggested that it sees this priority as sufficient to overturn ideas about the liberty of the individual against the state which have governed our approach for a long time, but also as recently as (say) the passage of the Data Protection Act 1998.
Under the proposed legislation, the divulging of such information will require the consent of the Board of Inland Revenue. So did the use of section 20, Taxes Management Act 1970 when it was introduced, and yet today it is part of the regular armoury of the tax district.
What price personal liberty?
So there are worries here. First of all is the assumption that almost any interference with personal liberty is justified in the name of fighting crime (have any of your clients tried opening a bank account lately?) and that any objection makes you – at best – soft on crime. There is the change in emphasis that sees us moving towards a position where one has to prove that the sources of one's income are honest. Then there is the tendency for such powers, once introduced, to become available at a lower and lower level.
In my view, we should be much more careful about combining the powers of the police with the powers of the taxman. This is the approach of the police state. It assumes that those who will use those powers are, and their successors will be, honest and incorruptible, but at the same time it produces immense temptations for them not to be.
Casual corruption
In recent history it has been a constant struggle to maintain that position in some of our police forces. It has been largely true of the Civil Service, but that is not because of any special feature of the British character. It was because the Victorians, finding both civil and military services casually corrupt, set up structures to end and prevent such corruption. By the 1970s it seemed amusing that to borrow money from a junior officer was a serious offence, but that rule had once played a part in cleaning up the public services.
A bold assumption
We may expect the Inland Revenue to make mistakes from time to time; some of us may feel that it can be pigheaded at times. But we do all expect it to be honest, and furthermore, we expect Revenue officials who are dishonest to be severely punished. I do not think that the proposed legislation, by assuming that honesty, will necessarily protect it.
Simon Sweetman is a tax partner with Scrutton Bland, Colchester, and can be contacted on tel: 01206 548811, or by e-mail: simon.sweetman@scruttonbland.co.uk.
