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Cameron defends HMRC seizure plans
The cross-party Treasury Committee said it had "considerable concern" over Chancellor George Osborne's debt collection proposals
Prime Minister David Cameron has defended plans to give the taxman new powers to seize money directly from the bank accounts of people who owe more than £1,000 in tax or tax credits.
An influential House of Commons committee has said it has "considerable concern" over the plans, and urged further scrutiny of the debt collection proposal, which was unveiled by Chancellor George Osborne in his March Budget.
Mr Cameron insisted that it was right to pursue tax debtors by every means possible, warning that the alternative would be to put up tax rates.
Under the scheme, HM Revenue and Customs (HMRC) will be allowed to gain access to money held in a debtor's bank or building society account - including joint accounts and Isas - without needing to apply to a court.
The cross-party Treasury Committee said in a report: "The proposal to grant HMRC the power to recover money directly from taxpayers' bank accounts is of considerable concern to the committee. Giving HMRC this power without some form of prior independent oversight - for example by a new ombudsman or tribunal, or through the courts - would be wholly unacceptable."
The committee also highlighted the potential for fraud and error if the taxman was given direct access to millions of accounts, warning: "This policy is highly dependent on HMRC's ability accurately to determine which taxpayers owe money and what amounts they owe, an ability not always demonstrated in the past.
"Incorrectly collecting money will result in serious detriment to taxpayers. The Government must consider safeguards, in addition to those set out in the consultation document, to ensure that HMRC cannot act erroneously with impunity. These might include the award of damages in addition to compensation, and disciplinary action in cases of abuse of the power."
HMRC said the new powers would affect a "small core" of around 17,000 people a year who typically owe £5,800 in tax and tax credit debts. The cash will not be taken under the plans unless it still leaves the debtor with at least £5,000 across their accounts.
The revenue body argues that joint accounts must be included in the plans, otherwise they would give debtors an opportunity to wriggle out of paying what they owe.
In cases where someone who owes nothing to the taxman shares a joint account with a debtor, the taxman would only recover debt from half of the funds in the account.
Anyone whose name is on the account would be notified when a hold has been placed on the funds and both the account holder who owes tax and the one who does not would have the right to appeal
Eamonn Butler, director of free-market think-tank the Adam Smith Institute, condemned the plans as a "fundamental assault on the rule of law" and "dangerous".
He said the proposed new power "is contrary to the fundamental principle that people are innocent until proven guilty".
UK Independence Party (Ukip) leader Nigel Farage told LBC 97.3 radio: "It's appalling. What the taxman now does is he sends you a demand and says 'You owe me this money, you're guilty. Prove to me your innocence'. Now we are going to give them the power not just to send us the demand and threaten us, but to take it straight out of our bank accounts. It mustn't be allowed to happen."
Mr Cameron told Sky News: "I think we have a choice here. If we don't collect taxes properly and make sure people pay their taxes properly, we look at the problem of having to raise tax rates. I don't want to do that, so I support the changes that the Chancellor set out in the Budget, which is to really say that not paying your taxes is not acceptable.
"I'm sure the Treasury will look very carefully at the detail, but it's very clear that they can only do this if it's a debt of over £1,000, they can only do it if there's £5,000 or more in the account after this has been completed. There's a set of rules and regulations.
"But on the general principle, do we want to pursue every avenue of making people pay their taxes that they are meant to pay before we put up taxes - because that's the alternative - absolutely, yes we do."
A spokesman for HMRC said: "Most people pay their taxes on time, but a minority do not, and some refuse to engage with us at all.
"This will only affect a tiny number of debtors, whom we have contacted a minimum of four times to ask for payment."
A Treasury spokesman said: "The Government's long-term economic plan is to reduce the deficit so that we deal with our debts.
"It is therefore important that people pay the tax they owe on time. Although the vast majority do this, there is still a minority that chooses not to pay, despite being able.
"The proposed powers will give HMRC another tool to collect tax debt owed. The current consultation includes a range of safeguards to ensure the power is tightly targeted."