Time to Stamp Out Tax Evasion - The Prison Option

As the Director of Public Prosecutions makes a keynote speech about tax evasion amongst the middle classes, perhaps this heralds a new government policy to clamp down on those who rip us off.

What would you do with an additional £533? The mouth waters at the prospect of buying a new television or iPad, getting the legendary Arcam rCube, flying to New York, or possibly enjoying a luxurious spa visit or that special weekend for two in a top hotel.

It is rather distressing to learn that with all of these tempting choices, I spent this sum on funding a tax evader. So did every other reader of this column, not to mention everyone else in the country.

Admittedly, some of those investors did rather well out of it. They might have given £533 to the generality of tax evaders but they will have benefited to the tune of many times as much, in some cases millions, through the use of schemes that are at best questionable.

When Keir Starmer, the Director of Public Prosecutions decided to announce that he was increasing the number of potential criminal prosecutions for tax evasion fivefold to 1,500, it was a little unkind to point out how much we are all donating to these criminals.

This new hard approach begs an awful lot of questions. If these incredible amounts of money are being stolen from us, why have succeeding governments, the tax authorities that they fund (to an increasingly limited extent) and possibly even our esteemed Fourth Estate not done far more to remedy what can only be described as an outrageous position.

From a different viewpoint, should those that promote schemes to minimise tax liabilities really spend years behind bars next to murderers and rapists, all at public expense?

This all harks back to several previous articles suggesting the need for properly beefing up the Revenue, which must make sense.

While more criminal prosecutions, as long as they are successful, will be a good start, this is only scratching at the surface of a much bigger problem.

The General Anti-Abuse Rule (affectionately nicknamed GAAR like some family pet) might help. Already though, tax planning outfits are sending promotional material to innocent members of the public suggesting that they can reduce tax liabilities to a staggering degree.

Indeed, a recent e-mail suggested a plan that would, given the right commercial circumstances to be fair, lead to a capital gains tax rate of less than 1/10 of 1%.

This might well be perfectly legal but, if so, the Chancellor of the Exchequer should surely be taking the requisite steps to consider whether subsidising tax reduction schemes represents an appropriate use of public funds.

Regardless of specific tax avoidance plans, whether abusive or not, rearming the Revenue and establishing a general tax amnesty would bring in untold billions if operated correctly. Similarly, taking a root and branch approach to analysing the way that our taxing authority operates and getting experts into the right places would undoubtedly have a major impact on the Black Economy.

It seems unlikely that very many of us would applaud the efforts of those involved in tax evasion, while a significant majority might not feel wholly distressed if those promoting abusive tax avoidance were also brought to book or even given long prison sentences.

Let us therefore hope that this headline-grabbing announcement is the start of something significant. Even better, perhaps within a couple of years we might actually be able to spend that £533 on something that we want, not a second yacht for somebody who really doesn't need the extra funds or even just a Spanish holiday home for a modest member of the middle classes.

Comments
ShirleyM's picture

If it were me ...    1 thanks

ShirleyM | | Permalink

... the first thing I would do is look into company strike offs.

There is an increasing number of people who trade through a company, don't submit anything to Co Hse, get struck off, pocket the profits (tax free) and start again.

I would also pursue Directors that allow companies to have huge debts and still build up new debt even though it is obvious they are insolvent. This is a massive problem for their creditors, if they are small businesses themselves.

Why are these problems ignored, and in fact are encouraged by Co Hse? Are they not worth the costs of pursuing?

Slightly disappointing comment

Anthony123 | | Permalink

on an interesting speech, as it conflates avoidance and evasion.

As I understood it, the prosecutions are to be of those who EVADE tax quite consciously and deliberately by the use of deliberate concealment or (presumably) fraudulent documentation.

This can only be a good thing and may make more people realise that EVADING tax is a crime. I sometimes wonder how many of those challenging big companies on (legal) avoidance make sure that every iota of their income is notified to HMRC.

I'd particularly like too to see some steps taken against those who "employ" staff but choose not to operate PAYE. They can then operate with lower costs compared to their competitors and leave the employees to carry the can.

kenny achampong's picture

Exactly    1 thanks

kenny achampong | | Permalink

Shirley, that's exactly right about Companies House.

The Guardian had an article a few years ago, and it obviously didnt know how much it might be, but estimates run into billions lost per year, possibly tens of billions.

Just stop Companies House striking off companies, unless its been agreed with HMRC, it's not rocket science. And as you say, it's inconceivable that the government doesnt realise, and why do they let so much tax revenue slip though its fingers ?

 

 

Old Greying Accountant's picture

Problem is ...

Old Greying Acc... | | Permalink

... the prisons are full of white collar criminal, whilst the violent savages walk the streets!

Old Greying Accountant's picture

Prison should be ...

Old Greying Acc... | | Permalink

... soley for those who are a physical threat to society.

We must have better ways of dealing with the rest, and for fraudsters and tax evaders making them pay it back in cash or in kond is the best option, after all, who pays for the prisons - good money after bad IMVHO and all about revenge not resolution. 

 

davidwinch's picture

Crown Courts and tax cases    1 thanks

davidwinch | | Permalink

Unfortunately, Crown Courts (the courts which deal with criminal cases too serious to be handled in the Magistrates' Court) are not well suited to dealing with tax cases. That is because cases are tried by a jury and the vast bulk of the evidence is given orally by question and answer sessions with each witness in turn.  Quite literally each witness in turn will 'stand & deliver' his evidence!

The procedure is that all the prosecution witnesses are dealt with first, then all the defence witnesses. The prosecution and then defence counsel address the jury. Then the judge sums up and the jury go off to decide either guilty or not-guilty.

But tax issues are better dealt with on paper, by professional and skilled people considering documents and schedules of information. Both correspondence and round table meetings can assist in the resolution of the issues.

So, in my humble opinion, a Crown Court is not a particularly suitable venue in which to decide a tax matter. In effect the only issue that can be dealt with reasonably effectively in a Crown Court is the simple question, "Was the defendant dishonest in his tax affairs? - Yes / No".

When the judge sentences an offender one of the factors he should bear in mind is the seriousness of the offence.  In a tax evasion case that means, "How much tax has been evaded?".  But the Crown Court trial process may not lead the judge to a clear understanding of the amount of tax 'lost'.

A better solution might be to introduce some procedures currently being introduced in civil courts including 'hot tubbing' of expert witnesses (where experts from both sides are called into the witness box at the same time to discuss the issues in front of the judge and counsel).

David

Add comment
Log in or register to post comments
This blog

The world is overrun with blogs and tweets. While they serve a purpose, this column is something slightly different. You will not find out what the author had for breakfast or the colour of the socks he is wearing. You will not be pestered with tedious listings of every film, book, play etc that your correspondent has ever seen or his latest success or otherwise on the golf links.

What readers have come to expect from a writer who has been associated with AccountingWEB almost from its inception are objective but on occasion quite possibly opinionated articles about topics that might be of interest to accountants as people. The intention is to be simultaneously challenging, thought-provoking and entertaining.

Since the writer is a partner in the Human Capital team at BDO LLP these columns will frequently take on issues relating to taxation, business and government policy. For light entertainment, he is also London Editor of British Theatre Guide so there will be plenty of hints and tips about what to see and not to see.

He also regularly writes about technology for London Accountant and almost anything else under the sun for a variety of publications so there are always going to be odd surprises in store. Travel, art, books, theatre, sports and consumer issues are all likely to receive consideration in coming months - but so are taxation issues, thoughts on the latest technology and, inevitably, the activities of the Chancellor and HMRC.