England’s new civil war

For rather obvious reasons, there has been a lot of hand-wringing in the media recently over what to do with tax evaders.  (I have my own rather Cromwellian ideas, but I shall keep them to myself.)  There seem to be two main options: prosecute them through the criminal justice system, or penalise them as a civil matter.  Those in favour of the former cite the deterrent and punitive effect, while those who support the latter point out that on average you get more money back in the end.  (You may be a little confused as to why there is a choice at all, when according to UK legislation tax evasion is a criminal offence, but much as the Crown Prosecution Service can decide not to proceed with a prosecution that it deems not to be in the public interest, so HMRC can decide that a civil attack will bear more fruit than a criminal one.)  As for current appetite, in a BBC story about the HSBC case, we learn that “Lin Homer, the chief executive of HMRC, has told MPs why there had been only one prosecution of someone whose hidden accounts in Switzerland had been revealed… Most of the information leaked in 2010, which involved about 3,600 UK individuals, was incomplete or ‘dirty’ data.  3,200 individuals had been traced and, of the 1,100 most serious cases – which HMRC had chosen to pursue – only 130 were now outstanding.  From the rest of those cases, £135 million had been recovered.  Two-thirds of the total group of UK-based HSBC account holders ‘were found to be compliant’ with UK tax rules, in some cases because they had non-dom status.”

What no-one seems to mention is the significance of the money laundering offence.  Simply put, if you have an acquisitive criminal offence, you can slap a money laundering offence on top of it – partly (if convicted) to increase the penalty, but also to (a) indicate that money laundering has indeed taken place, and (b) enable financial investigators to get in there and find the money and those who have handled it.  In other words, adding a money laundering offence is a Good and Worthy Thing.  But you can’t add it to a civil investigation.  So for all of those tax evaders with whom HMRC has made peace, there is no way for investigators to drill down into their assets to look for further criminality or for links with other dodgy people.  Nor can the investigators find out which institutions were involved in the money laundering (for money laundering will certainly have taken place) – which means that crooked individuals in the regulated sector cannot be rooted out.  And crucially, nor can the investigators gather evidence on regulated institutions that are failing to meet their AML obligations and allowing their clients to get up to all manner of fiscal naughtiness.  The benefits of the criminal prosecution of tax evaders are indeed much more widespread than it might first appear.

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12 Responses to England’s new civil war

  1. David Maxwell says:

    Hi Susan: I think the difficulty HMRC and the CPS faced is that the discs were stolen, so the evidence contained in them may not have been admissible evidence in a criminal case.

  2. Thank you, David – I hadn’t thought of that for this situation, and it certainly explains the position of HMRC – I’m grateful. But the principle – criminal or civil approach to tax evasion – remains a concern.
    Best wishes from Susan

  3. Robert James Long says:

    Hmm. I think HMRC and the CPS where just avoiding a bit of work form themselves to be honest. There where many perfectly ethical and legal ways round the stolen disk issue and they chose to do none of them.
    Even if that was insurmountable, in this particular set of facts HMRC would be able to use the information when handed to them later by the french government (I understand their is some difference of opinion about when this occurred with the French saying they made it available almost straight away). I am forced to the conclusion that HMRC and CPS decided to take what they thought was the easier route which would certainly match the very light touch ineffective regime the former agency has applied to high net worth companies and individuals. I can only note that if my agency did deals with its offenders or discussed it over a nice meal people would rightly decry that as corruption. Hmm.

    The problem I think is that tax evasion at the scale where seeing here is not seen as a “real” crime (actually some people, even in law enforcement sadly, feel that way about money laundering). I think adding a money laundering charge, while perhaps a bit draconian, would be quite effective at reminding people it is a crime. We’d only need to do it a few times before the message got through.

  4. Robert James Long says:

    As an aside, have you seen this?

    http://www.standard.co.uk/news/uk/crime-in-banks-a-threat-to-national-security-says-boss-of-national-crime-agency-10048870.html

    If i understand it this means a SAR issued by one institution will result in a voluntary disclosure by other institutions (Which I am confused about. Can NCA reveal the existence of a SAR to another institution?). I wonder what the unexpected side effects of this will be

  5. Many thanks for this, Robert – no, I had not seen it. I have done a bit of reading around it, and have just written a blog post for tomorrow about it. I would be grateful for your thoughts on that – and we’ll see what other comments we can prompt.
    Best wishes from Susan

  6. Dave Cutter says:

    Someone must have heard you Susan……..see breaking news……..http://www.bbc.com/news/business-31516416…..

  7. Delighted to hear it, Dave! Now that I’m on a roll, what can I do about getting Jaffa Cakes on the NHS as an essential dietary supplement…

  8. My gast is flabbered, Dave – I shall have to watch my Pronouncements in future!

  9. Dave Cutter says:

    Now that we have had a giggle….here is something for you to ponder upon……in your blog above you state this isolated incident was a ‘missed opportunity’… i.e. Nor can the investigators find out which institutions were involved in the money laundering (for money laundering will certainly have taken place) – which means that crooked individuals in the regulated sector cannot be rooted out. And crucially, nor can the investigators gather evidence on regulated institutions that are failing to meet their AML obligations and allowing their clients to get up to all manner of fiscal naughtiness……..so on the wider aspect of FATCA (US & UK) and the IGA’s and the mother of all information gathering exercises – the Common Reporting Standard – Automatic Exchange of Information – (which is just a few years away….and gets little air-time) will result in the ‘tax man’ of 60+ jurisdictions having information exchanged ……. The Standard provides for annual automatic exchange between governments of financial account information, including balances, interest, dividends, and sales proceeds from financial assets, reported to governments by financial institutions and covering accounts held by individuals and entities, including trusts and foundations. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. So as one commentator wrote…. From 2020 tax authorities will be able to accurately estimate a person’s income from all sources along with their net worth to within +/- 5% of their possessions. So the tax-man’ will be all knowing and the accidental consequence of this is that they will be able to have a clear picture of a number of money launderers. Not just from a tax perspective. Interesting times ahead.

  10. Heavens, Dave – you have just added about six items to my “things to read up about” list! As you say, interesting times ahead.
    Best wishes from Susan

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