HMRC issued a statement on tax evasion this afternoon. As they say (in part):
Since April 2010, the government has:
- secured £100 billion of compliance revenues
- secured £31 billion from large business compliance work
- brought in £2 billion of revenues from offshore tax evasion through international agreements and disclosure facilities
- collected £135 million in tax, interest and penalties from people on the HSBC Suisse list
- secured £852 million from the UK's 6,000 richest people
- made 42 changes to tax laws
- won more than 80% of cases in tax tribunals
- five-fold increase in criminal prosecutions for tax crimes
- prosecuted more than 2,650 individuals for tax crimes
- secured 2,718 years of prison sentences.
See HMRC Fast Facts for more information.
First, quite specifically the government has not done this. HMRC is a non-ministerial department to prevent government claims on this issue. It is now apparent HMRC does not know where it stands constitutionally.
More importantly, if you follow the link on criminal prosecutions you get this table:
Those cases total 2,005 convictions.
So have they successfully prosecuted 645 people in 10 months this year? Maybe: but the data is not available.
What is available is data that casts very real doubts on the validity of these claims. I refer to a Mail article in 2013 that says:
An injection of funds two years ago to help crack down on tax fraud saw HMRC launch 240 prosecutions against individuals last year, a jump of 53 per cent on 2011, according to an international law firm.
But the number of convictions was only up 4 per cent - 154 compared to 151 - meaning a lower proportion of actions are ending in convictions. Pinsent Masons said there are doubts about the Criminal Prosecution Service's (CPS) ability to deal the increased caseload.
And then I found this in the Guardian:
The number of criminal convictions for tax evasion has jumped by more than a third during the last year as part of a new crackdown by HM Revenue & Customs (HMRC), according to law firm McGrigors.
It said HMRC figures, obtained following a Freedom of Information request, showed there was a 38% increase in convictions for tax evasion, with 148 convictions secured in the year to 31 March 2011, compared with 107 the previous year.
So it would seem that based on Freedom of Information requests to HMRC the real rates of conviction for income tax evasion (which is what the press release relates to) years for which data is available might be:
2009 - 10 = 107
2011 - 12 = 148, or maybe 151
2012 - 13 = 154
In other words, HMRC are massively overstating their claims for those years this afternoon.
There is also doubt about the data for subsequent years. As the Guardian reported last October:
The tax authority set a target of prosecuting 1,165 people a year for tax evasion by the 2014/15 financial year, but analysis of the last tax year shows HMRC prosecuted just 795 people. It means HMRC will have to increase the number of prosecutions this year by 46% to hit its target.
Analysis by Thomson Reuters shows that despite the government pumping in an extra £1bn to beef up HMRC capabilities the number of prosecutions increased by 29% to 795 in the 2013/14 tax year. The number of prosecutions more than doubled between 2011/12 and 2012/13 to 617.
795 in 2013/14 is way short of 915, just as 617 is way short of 770. Even the gross numbers do not stack in that case. But let's also be clear: if in 2012/13 the true figure is half of 617 that's more than double the 154 actually convicted.
None of this makes sense unless, of course, we note what HMRC says elsewhere on convictions in 2013:
Between January and the end of November HM Revenue and Customs (HMRC) investigations led to 690 successful convictions — up from 477 in 2012, and the highest since the 2010 Spending Review. These convictions led to sentences totalling 355 years in prison.
The investigations covered everything from complex VAT, income tax and benefit frauds to smuggling cases.
So, suddenly the reason for the difference is apparent. Although the data issued today is headed:
Statement by HMRC on tax evasion and the HSBC Suisse data leak
the actual information to which it refers in support of its claims includes prosecutions for benefit fraud, smuggling, VAT fraud and maybe other things in addition to anything remotely related to income tax evasion and offshore.
The truth is conviction rates for all income tax fraud (not just offshore) were in total only 28% of those claimed by HMRC in this release. And by then the increase in conviction rate was actually declining.
The fairest description of today's claim from HMRC is that it is a very dodgy dossier indeed. More fairly still, I'd call it something little short of a fraudulent misrepresentation of the truth.
Hat tip: @jolyonmaugham here
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“won more than 80% of cases in tax tribunals”
That is what sticks out for me. If you are not losing about 50% of your cases you are not bringing enough cases.
They only bring easy ones
Indeed.
But the point is valid. It is also one of principle, because such a policy of only bringing “certainties” has adverse effects in two ways. First: Those who train in such a culture learn that it is very difficult to bring cases, though they have no evidence for that since they don’t test it: and that is a progressive process, arguably. Second, it usurps the rights and responsibilities of the tribunal. The decision is not made by the decision maker, but by someone else long before it gets near the tribunal. That cannot be right.
Agreed
We’ve got ’em on the run. Keep up the good work. This has a lot more legs.
Perhaps the DWP benefits fraud team should have zero budget and be fully funded by recovered unpaid tax on a ratio of £30 recovered to £1 budget (based on HMRC figures – as I’m feeling generous).
🙂
” Those cases total 2,005 convictions.
So have they successfully prosecuted 645 people in 10 months this year? Maybe: but the data is not available”
Richard
I think you might be confusing prosecutions with convictions. The number of prosecutions for the 4 years is 2650, i.e. exactly the same figure given in the HMRC statement.
But peosecutions prove nothing
Just a quick comment from someone who’s taking a break from the tax world on taking a tax case in the UK.
The sheer effort, expense and time involved in mounting any from of tax litigation is huge for both sides. It feels as though you’re getting all the legal advice in the world at times. This is for both sides from the initial dispute to appointing counsel (and sometimes junior counsel as well). The call on resources is huge and if HMRC decided to litigate every disputed case it would gum up the system (normal day to day compliance as well as the tax litigation process completely). There’s also the chance that the members of the tribunal (at first tier level) turn out to be complete numptys who do not understand what’s going on and what is being discussed (this is politely referred to as “litigation risk”). You only get proper legal and judicial review when you hit the Upper Tribunal.
This is why HMRC use their litigation and settlement strategy to decide what they should litigate and what they should not, i.e.: come to a settlement. I’m not going into the criteria that they use, but it makes sense for them to only litigate matters where they are able to set a precedent for other cases or where there is a strategic risk to the UK tax system (for strategic read “big bucks”). HMRC too are afraid for running into the “numpty” factor and finding that they lose a case they really wanted to win (often why HMRC do not appeal cases from the First Tier Tribunal so to avoid setting a precedent).
One other more philosophical point for people to consider. When HMRC want to challenge a taxpayer then that taxpayer better have the ability to marshal equally as many resources as HMRC. It is quite frightening to see the level of opposition that can be brought against a taxpayer in a dispute. When you’re a big corporate then you have the resources to match them. Woe betide a small trader caught up in a dispute with HMRC who cannot afford to challenge them in a legitimate dispute.
No one is saying all cases need be litigated
But ducking cases fails to deliver justice
I think the other Richard is trying to say that taking cases against the little guy rarely gets justice either because he can’t afford to be represented properly in a dispute, even when he is in the right.
It may well be that the little guy doesn’t only have trouble with benefits, he may also have trouble with unfair taxation (litigated or otherwise). It isn’t at all clear from the figures how many of them relate to the big fish. If HMRC are pushed to litigate more you can guess which cases they are going to pick … the easy poorly represented ones, ie the ones taken by the little guy.