.png)
.png)
KEY POINTS
- Unlike some countries, the UK has always kept taxpayers’ information confidential.
- Duty imposed by CRCA 2005, s 18, subject to exceptions.
- Parliamentary Account Committee disagrees with Hartnett on right to disclose.
- Suggested statutory amendment to allow disclosure to committee, if they make disclosure themselves.
It started on television with the BBC’s beautiful remakes of Wallander, and in the bookshops with Stieg Larsson’s Millennium trilogy: The Girl with the Dragon Tattoo, etc.
Suddenly, Scandinavian detective fiction was hot. The Danish 20-part thriller Forbrydelsen was a surprise hit on BBC4. The American remake, The Killing, followed on Channel 4, and soon every name on the bestseller list seemed to end in what a computer would think was a zero.
At some point in most of the Wallander stories a detective will say something like ‘according to his tax return, there’s no way he can afford a place like this’.
In Sweden, where Wallander is set, this does not require any special request by the police to the revenue authorities. The details of everyone’s tax return are publicly available. If you want to know what your co-workers or your neighbours earn, then just look it up.
That’s a very Scandinavian, communitarian, approach; not the Anglo-Saxon way, you might think. But even in the USA, although most people can keep their tax returns private, presidential candidates are required to make them public, to be pored over in great detail by analysts.
And not only the candidates: Senator John McCain’s wife, Cindy Hensley McCain, refused to make her tax return public during the last presidential election when her husband was a candidate, as she was legally entitled to because they filed separately, but she faced a storm of criticism for doing so.
The British are asking to see more and more of their politicians’ financial affairs. MPs having proved themselves so spectacularly unworthy of trust over their expenses, they now have to submit (and publicly disclose) receipts for virtually everything.
They also have to disclose on the register of members’ interests any external income or financial assets which might give rise to a conflict.
But even then we stop short of asking for sight of their (and their spouses’) tax returns. So we have no way of knowing whether any of our legislators have themselves taken advantage of the tax avoidance schemes they so roundly condemn, for example.
And, to me, that is entirely right. We are a society which respects privacy, and which still has a vague distaste about people who talk about money over the dinner table. Or, indeed, at all…
Duty of confidentiality
So a key section in the Commissioners for Revenue and Customs Act (CRCA) 2005, s 18, which governs the operation of the merged HMRC, sets out a duty for their officers to ensure that tax information is kept private:
‘(1) Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.’
Laudable, but of course it cannot be an absolute duty. There are times when HMRC has to give information, even information about individual taxpayers, to others. If a bailiff is being instructed to seize goods, clearly they need to know who they are seizing them from, and where they live.
If there is to be a criminal investigation, then other people such as prosecutors are going to have to be told the details.
So there are exceptions to the prime duty not to disclose, of which the first is:
‘(2) But subsection (1) does not apply to a disclosure … which:
(i) is made for the purposes of a function of the Revenue and Customs; and
(ii) does not contravene any restriction imposed by the Commissioners.’
PAC spat
Which brings us to the Public Accounts Committee (PAC), its chair, Margaret Hodge, and the spat which it, and in particular she, is having with Dave Hartnett.
Someone in HMRC, entirely in contravention of that duty in s 18, has leaked documents about the tax affairs of Goldman Sachs.
To me, the real story is that this person, whoever he or she is, has not just breached the trust put in them by HMRC as their employer, but has committed a criminal offence; the duty in s 18 is backed up by a criminal sanction in s 19.
While sources should always be protected by journalists, they also have a duty to consider why they are being leaked to, and to examine that material critically.
However, the committee seemed unconcerned about this criminality. They wanted to concentrate on the involvement of Hartnett in settling a tax avoidance case with Goldman Sachs.
Time and again at its most recent hearing on the issue, members of the committee, particularly Hodge, questioned Hartnett about the case; time and again he responded that he could not answer because of taxpayer confidentiality.
This did not satisfy Hodge, because there was also a leak of advice given to Hartnett about what he could and could not disclose. In printing this, The Guardian seemed to accept without question that the spin given on the document, apparently by the leaker (helpfully highlighted by crosses against a couple of items), was correct: Hartnett could disclose if he wanted to.
In fact, (as I explained last week on our blog) it has much the same message as the explanation subsequently given in writing to Hodge by Hartnett.
Functions and permissions
One of the functions of HMRC is to help the PAC in its role of holding government to account for its efficiency. HMRC therefore accept that the PAC should be given details which do not allow taxpayers to be identified.
However, HMRC believe it is far less clear that information which identifies taxpayers can be submitted to the PAC.
Partly this is because such information is clearly much more sensitive, but it is also because HMRC believe taxpayers would be far less ready to fulfil their duties if their information might be disclosed.
So there is some real doubt (and remember this is a criminal offence) whether the information can be disclosed at all.
Second, even if it can be disclosed, should it be? The absence of a prohibition does not mean a permission. It only means that the ‘decision maker’ (in this case Hartnett himself) has to consider whether or not it should be released.
For broader but similar reasons, HMRC have always concluded that, even if they do have the right to make such disclosures, they should not. That is part of the guidance given to officers, and made public for taxpayers in the internal manuals on HMRC’s website.
Guarding guards
But what about oversight? One of the key questions in this affair is quis custodiet ipsos custodes: who guards the guards?
To which HMRC give a straightforward answer: the National Audit Office (NAO), which has similar responsibilities for confidentiality as HMRC.
As a result, HMRC are allowed to give, indeed are bound to give, the NAO any information it requires to do its job, including confidential information about individual taxpayers and their affairs, knowing that it will not be disclosed further.
That, however, is not enough for some on the PAC, and in particular its Chair, who made no attempt to hide her disgust at the answers given by Hartnett during the last committee hearing.
She clearly believes the PAC should be the final guardians; they should be the quis who custodiet.
If that is what Hodge believes, then I have a suggestion, indeed a challenge, for her. Put HMRC under a duty to provide the information if certified as necessary by the PAC itself.
In fact, let me be even more helpful and draft the necessary clause to amend CRCA 2005, so she can move it as an amendment to the Finance Bill 2012:
‘At the end of CRCA 2005, s 18(2) add:
‘(iii) which is made in response to a request from the Public Accounts Committee, including a request for information about identifiable taxpayers ...’
But, of course, this puts the PAC in the position of being able to ask for the tax affairs of others to be disclosed while their own can be kept private. It is hard to see how that could be justified. We are back again to quis custodiet, I think.
So let’s take a lead from the US presidential rules and add a bit more to that draft clause:
‘…provided that, at the same time, the PAC requests that the last three tax returns submitted by each member of the PAC are disclosed, to the extent that they have not already been, and are made available to the public on the House of Commons website.’
I think that’s fair, don’t you? Sauce for the goose, and so on? I’m sure if I have made any errors in the drafting HMRC will be happy to help correct it.
So if she is serious about the PAC having the power to hear about the tax affairs of named individuals or businesses, I look forward to seeing that amendment in the name of Margaret Hodge next April.
I will follow the progress of the amendment with interest, and I wish her the very best of luck in trying to persuade her fellow MPs to vote for it. I think she might find that she needs it.
Robert Maas, Blackstone Franks LLP, writes...
Of course you are right, but clearly HMRC must not volunteer confidential taxpayer information to third parties, even a third party as august as the Public Accounts Committee (PAC).
But in his letter to the PAC explaining why HMRC could not do this, Dave Hartnett concentrated on the disclosure gateway in CRCA 2005, s 18(2)(a).
Clearly that does not permit a disclosure to the PAC. But what about s 18(2)(h) (which permits a disclosure “which is made with the consent of each person to whom the information relates”)?
There is a problem insofar as the PAC normally does not know the taxpayer concerned.
But if the PAC, on behalf of the body of taxpayers, has oversight over HMRC, surely it is incumbent on HMRC to assist the Committee as far as possible to obtain the information that it considers necessary to carry out its work.
While I note your espousal of the National Audit Office, to my mind that body’s remit is limited to checking whether the taxpayer is obtaining value for money; it is no part of its role to monitor how HMRC exercise the discretions that parliament has given it. That is surely a role of parliament, through the PAC?
It would be permissible and reasonable, where the PAC felt that it needed information about a taxpayer’s personal affairs, for HMRC to ask the taxpayer whether he wanted to be put in touch with the PAC.
That does not breach the duty of confidentiality. If the taxpayer says, “No”, then HMRC could convey that information to the PAC without revealing the taxpayer’s identity (if that is not already known to the PAC).
But it should not be automatically assumed that the taxpayer will say, “No”. A couple of years ago I wrote an article criticising HMRC’s conduct in a published Tribunal hearing.
The taxpayer called me in response to the article (you may underestimate the breadth of Taxation’s circulation), and filled me in on the background.
I have no doubt whatsoever that if the PAC had been interested in his case, he would have told them his side of the story and authorised HMRC to give PAC access to his file.
He (and I) felt that he had been very unfairly treated and he wanted anyone who would listen to know that, in the hope that they might be able to help him.
He had already written to his MP and had not barred the MP from passing on the details to other MPs.
I do not have a clue if Goldman Sachs would have authorised disclosure to the PAC had they been asked.
They may well have felt that if the PAC want to criticise their conduct, it would be better for it to do so on the basis of the facts rather than on the basis of press speculation.
My point is that in the guise of confidentiality, HMRC seem to have refused them the opportunity to make the decision.
Confidentiality is important to protect the taxpayer; however it ought not to be an excuse to enable HMRC to refuse to disclose information to parliament where the taxpayer is prepared to agree to such a disclosure.