Government boost for tax evasion

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It seems safe to assume that very few, if any, readers of this column would speak up in favour of tax evasion.

Some may be quite active proponents of extreme forms of tax avoidance that those in government would regard as illegal but that is a debate for another day.

Shakespearean enthusiasts and those who were forced to gain an in-depth understanding of Macbeth in order to pass English exams will know that the speech starting “tomorrow and tomorrow and tomorrow” later refers to “a tale told by an idiot, full of sound and fury, signifying nothing”.

In Parliament on Monday, a lone voice representing her Majesty’s government used just a single “tomorrow” to have a similar consequence.

Given that at present the British political status quo is close to collapse, it says something that the amendment which led to this quiet outburst was proposed by two former ministers who have long been opponents: Andrew Mitchell from the Conservative side and Dame Margaret Hodge of Labour.

The bill that they were proposing to amend had been initiated long before, with a view to ensuring that tax havens with a loose connection to the United Kingdom (ie those in what are known as dependencies) would be forced to introduce a degree of transparency. This would mean that the authorities and in particular HMRC and its peers around the globe would be able to determine who had ultimate ownership of assets, sometimes hidden away for generations.

For those that had innocently invested offshore, this should have no significant adverse consequence.

However, as the revelations about “the Panama papers” made clear, not every overseas investor in these territories was quite as innocent as they should have been, with money laundering being a prime motive.

As the Guardian points out “Anti-corruption campaigners believe public records of share ownership would restrict the use of anonymous offshore companies by terrorists, dictators, corrupt politicians and criminals.” This seems like a pretty good rationale for an immediate change in legislation.

While there can be very good reasons for hiding your identity when investing large sums of money, many do so purely to evade taxes or, at the very least, with evasion as a significant motive.

The amendment proposed by the parliamentarians seems to have been very simple. They wished to extend the legislation, which is not due to come in until the end of next year anyway, to Guernsey, Jersey and the Isle of Man.

Prima facie, it is very hard to see why a new piece of legislation intended to protect our tax revenues and potentially reduce other types of criminality should be limited. If it is going to help in somewhere like the British Virgin Islands then why not the Channel Islands?

Rather than provide a comprehensively argued case for rejecting the amendment, that lone voice shouting “tomorrow” shot down not only the amendment but the whole bill. As a result, it is currently being suggested that the changes will be delayed for further three years, which is great news for all of those using overseas territories to shelter the proceeds of crime or evade taxes.

If any reader, possibly an accountant who is also an MP, can provide a coherent explanation as to why these proposals have been shelved, I for one would love to hear from them.

About Philip Fisher

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07th Mar 2019 15:06

Here’s a ‘coherent explanation’ – the Government was rightly wary of trampling on the Crown dependencies’ self-governing status via a sloppy backbench amendment.

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to ArronfHarrison
07th Mar 2019 15:30

Aaron
Are you familiar with the Kilbrandon Report from 1973? That made it quite clear that Crown dependenciess are only allowed the discretion they have so long as they act within the boundaries of good governance. I think that facilitating tax evasion would breach those boundaries.
Now maybe we can all think of a number of more relevant reasons why the government might not want to counter tax evasion, perhaps not entirely to their credit.

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to I J Lessels
07th Mar 2019 15:48

And who makes that determination? Jersey strongly disputes that they are facilitating tax evasion and has made representations to this effect.

In any case, the Kilbrandon Commission did not lead to any substantive legislation in respect of the CDs so it has no relevance. 'Reports' are not law.

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08th Mar 2019 10:51

In the immortal words of Mandy Rice-Davies "Well they would wouldn't they"!

The report described the state of the law. That hasn't changed since 1973.

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By maasrw
08th Mar 2019 15:43

Privacy used to be a fundamental human right. Have I missed a change that outlaws privacy because a tiny number of people might use it to hide tax evasion? I find it depressing that Accountancy Age should join those who hold human rights in contempt in support of Margaret Hodge's (and apparently Philip Fisher's) obsession with stopping all tax evasion, whatever the cost to the preservation of civilised society might be.

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to maasrw
12th Mar 2019 15:47

True, it's a tiny number of people. Unfortunately, they control rather a large proportion of the world's wealth. Also tax evasion is only a small part of this issue. These jurisdictions are used to shelter the proceeds of serious crime such as drugs and people trafficking, not to mention the sheltering of the wealth of kleptocratic rulers. There's been a lot of talk about a war on drugs. Until we open up the money flows, that hasn't even started.
There are a lot of human rights. Privacy is just one. In the real world, peoples various conflicting rights have to be balanced. That's what we call politics. Anyway this information is not going to be out there in the public domain. It's not going to be like Zoopla and the value of your home!

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23rd Mar 2019 14:59

I am looking for such an informative post for a long time. Thank you for this post

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