Last week Chancellor George Osborne announced that the government is to consult on a new criminal standard for those who secrete their money overseas to avoid paying tax in the UK.
Under the proposals HMRC would simply have to demonstrate that undeclared income was taxable to initiate a criminal prosecution rather than proving that it was the individual’s intention to evade tax, as is the case currently.
Under current rules, offshore tax evaders can face penalties equivalent to double the tax owed and criminal prosecution with the possibility of a custodial sentence. Should the government get their way then prison sentences would be increased as well as more punitive fines.
Incentives in the form of financial rewards could be offered to whistleblowers who assist in uncovering untaxed assets placed offshore, sounding as though the government has taken its lead from the Canadian model.
Speaking of the proposals, Mr Obsborne said:
“We’ve already done a lot to crack down on those who don’t pay their taxes, now we’re introducing a new criminal offence for people who hide their money offshore.
And the message is very simple – if you’re hiding money offshore, we are coming to get you and the criminal law is going to come and find you.”
As much as tax evaders should be brought to task, giving HMRC more sweeping powers to criminally convict a taxpayer at will sets dangerous precedents. Only last month HMRC were given licence to raid the bank accounts of those people that fell into tax arrears and where the department had made repeated but unsuccessful attempts to collect the debt. The Revenue already has enough powers without turning them into a mini police state terrorising the taxpaying community.
I am in agreement with Bill Dodwell, head of tax at Deloitte, who told the Times newspaper:
“People should not be put in prison unless you can prove intent.
I’m shocked to find that an offence which could lead to a prison sentence could be decided on a strictly liability basis.
If this charge applies to all evasion cases I think that’s unacceptable.”
It maybe that there is little intention to use such prosecution powers but rather as a device to scare evaders into owning up.
These proposals appear to be a reaction to the lack of success HMRC have had following the deal brokered between the UK and Swiss governments in 2011, from which the Chancellor forecasted a windfall of £3 billion but last year only raised £800 million.