Tax evasion » Tax Research UK

Tax evasion gets just that little bit harder

Feb 162012

The Task Force on Financial Integrity and Economic Development, of which Tax Research UK is a member, has welcomed new moves to tackle tax dodging announced by the global body charged with fighting financial crime.

Under revised standards from the Financial Action Task Force (FATF), tax evasion will be an offence that can lead to a money laundering charge in the future. That means that, as I have long argued should be the case, banks will now be obliged to be on the look out for suspected tax evasion by their clients and report it if they suspect it is happening. The new FATF recommendation will provide authorities with a powerful tool to help prosecute individuals and corporations attempting to dodge financial obligations, hide ill-gotten gains or fund illegal activities.

Although they carry no legal weight by themselves, FATF recommendations are considered the basis for national and international legislation to prevent the money laundering. As such we can expect this recommendation to be reflected in new law worldwide over the next few years.

That’s the good news. The bad news is that the FATF has not tackled one of the biggest problems with the current international financial system: the difficulty of accessing information about the real persons who have ultimate control over a company. It is “anonymous companies” that are a key part of the structure that enables criminals to set up the bank accounts they use to hide their funds. This represents a failure of political will by FATF member states, leaving a significant loophole that undermines progress elsewhere. As a result the FATF has taken a step forward, but still has a long way to go.

That said; no one should doubt the direction of travel. Those campaigning for reform to prevent financial abuse can see that their campaign is winning, and will emphatically win out in the end. The next step in achieving that will happen when the FATF requires all countries to have a public register of the ultimate person with control over a company, known as the beneficial owner. This could easily be integrated into the process of forming a company in any given country, and existing companies could be required to file beneficial ownership information with their next regular certification. How far away is this? Much sooner than most people expect and for one good reason – which is that the world over governments are losing out to tax abuse as they do not have this information and their willingness to accept that is going to be tested to the limit over the next few years as tax revenue becomes one of the scarcest commodities in the world.

The demand for transparency, accountability and for everyone who owes it to pay tax will deliver reform. It’s just a matter of time.

The New York Times demands no compromise in battle against Swiss banks

Switzerland, Tax evasion, Tax Havens, USA 2 Responses »

Feb 102012

In its editorial today the New York Times demands that the US government pushes ahead with its battle to bring tax evaders to court. While the British and German governments plough on with their shabby deals with the Swiss government, the US has been pushing Swiss banks to reveal data about US criminals hiding behind Swiss banking secrecy laws, and although the banks are trying to find wriggle room, the NYT sees no room for compromise:

“Almost three years after UBS, Switzerland’s biggest bank, paid a $780 million fine for helping Americans evade taxes and agreed to hand over the names of more than 4,500 American account holders, the Swiss banking industry refuses to exit the business of tax evasion. And the Swiss government still insists on protecting it from scrutiny. The United States should not compromise in pursuing the data it needs on American tax cheats.”

Who, apart from criminal tax evaders and the bankers who profit from flogging banking secrecy, would disagree? This is time for governments of all democratic countries to rid the world of banking secrecy. The US government should press home its advantage. As the NYT rightly points out, the Swiss banks are totally vulnerable here, and if they persist in defending the indefensible the US government can take strong counter-meaures.

“There is no need for the United States to accept this sort of arrangement. If Switzerland stonewalls, the Justice Department can indict banks that benefit from tax evasion and seize their assets in the United States, moves that could put them out of business. At some point, the Swiss government will find that result a lot more costly than handing over information on American tax cheats. “

Read the full editorial here.

NB: Reposted from the Tax Justice Network blog with permission

I might add that I think the UK should follow exactly the same path instead of the path of polite accommodation pioneered by HMRC right now.

Swiss banking secrecy: Don’t ask, won’t tell

Switzerland, Tax evasion, Tax Havens 1 Response »

Feb 102012

That’s the title of an article in the Economist today. I recommend it.

I’m pleased to note that it says:

Governments once turned a blind eye to their wealthy citizens’ offshore tax acrobatics. Now they are strapped for cash and hungrily hunt every penny in tax revenue. So a cold war on banking secrecy is turning hot. Tax evasion costs governments $3.1 trillion annually, according to Tax Justice Network, a lobby group. America, Britain and Germany have sought deals with Switzerland, Liechtenstein and other havens; the European Union is tightening up. Emerging powers like India are waging their own campaigns, too.

This is continuing endorsement of the role Tax Justice Network (and in this case, I, as researcher of this data) have in keeping this issue firmly on the international agenda. We’re not going away until we win.

And win we will for the reason the Economist notes: this is now a battle about tax revenues to pay for essential services and governments are going to win that battle. Switzerland and its fellow abusers are on notice to find something else to do: the days of tax havens are numbered.

Redknapp

Tax evasion 27 Responses »

Feb 082012

HMRC msut be fuming that Harry Redknapp is not guilty.

But shame ion them too. The ‘gift’ defence on the capital going into this account must have been known to them in advance and if both sides agree is hard to beat. They did agree. So they’re innocent.

But surely some undeclared income must have arisen on the account? It would be amazing if it had not. If they wanted a case why didn’t they prosecute on that? Now they’ve lost their chance. Harry is innocent. So be it.

The EU makes clear it is at war with Swiss banking secrecy, whatever Dave Hartnett thinks

Banking, Switzerland, Tax evasion 2 Responses »

Feb 062012

Bloomberg has reported this morning that:

Switzerland must eliminate banking secrecy and renegotiate tax accords with the U.K. and Germany that clash with regional initiatives, according to European Union Tax Commissioner Algirdas Semeta.

While Switzerland agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development, bilateral agreements signed in September with Germany and the U.K. allow client identities to remain secret.

“Banking secrecy that allows companies or individuals to hide taxes has no future,” Semeta said in an interview in Brussels.

I wonder which bit of that Dave Hartnett and george Osborne, with their appalling tax deal with Switzerland don’t understand?

Nor come to that, which buit those from Switzerland who defend such deals in comments on this blog don’t understand.

Swiss banking secrecy has to die because it exists to facilitate tax and other crimes. Now let’s move in to kill it.

Tax haven UK could hide money laundering in football

Companies House, HMRC, Tax avoidance, Tax evasion 4 Responses »

Jan 312012

Bloomberg has reported today that:

European soccer ruling body UEFA is asking U.K. authorities to investigate two so-called letterbox companies that helped Porto (FCP)fund a player transfer.

For Gool Co. and Pearl Design Holding Ltd. provided finance for the two-time European champion to sign Brazilian striker Walter da Silvafor 6.2 million euros ($8.1 million) in 2010, according to Porto’s latest quarterly statement.

As banks ratchet up lending requirements, soccer clubs are seeking alternative ways to raise funds, often in return for a share of a player’s future transfer fee, said Sandalio Gomez, who teaches sports management at IESE business school in Madrid. UEFA officials said this increases the risk of money laundering because it’s unclear who owns the letterbox companies, which have mailing addresses in the U.K. and seemingly nothing else.

“We are urging state authorities to look into it,” UEFA Secretary General Gianni Infantino said. “Because we are a private company, an association, we cannot go to a company when it is a letter box saying ‘please tell us who you are and what you’re doing.’ They will tell us: ‘Who are you to ask me?’”

This is a massive problem facilitated by the UK.

Whilst we in the UK offer limited companies for sale for only a few pounds and utterly neglect the need to then regulate or tax these companies – as I have shown to be the case here – then the UK is undoubtedly losing out heavily to tax evasion as I have suggested (my estimate is £16 billion a year) and may, as UEFA seem to be suggesting, provide opportunities for money laundering.

That’s utterly negligent behaviour by successive UK governments and is all designed to ‘save’ costs for Companies House and H M Revenue & Customs whilst ignoring altogether the tax foregone and the massive cost to the UK of the tax foregone and crime permitted.

If we want responsible business in the UK we start by making sure each and every company files its accounts, delivers a tax return and pays its tax. It’s really not too much to ask. But our government refuses to do it. Why is that?

Hartnett is right, and yet so, so wrong on the tax gap, for which he’s the main culprit

HMRC, Tax avoidance, Tax evasion, Tax gap, Uncategorized 9 Responses »

Jan 282012

The Telegraph reported yesterday that:

People who receive cash-in-hand payments for goods and services are harming the economy, according to HM Revenue & Customs (HMRC) most senior taxman Dave Hartnett.

Speaking to the Daily Telegraph, he criticised tradesmen and other workers who try to get out of paying tax by asking for their payment in cash and said there will be a crackdown to catch individuals who do so from April 2012 onwards.

Mr Hartnett claimed evading VAT or income tax is ‘diddling’ the economy and will lead to further cuts for things like hospitals and schools.

“Tax provides the funding to run the country: hospitals, schools and everything else. Every time someone pays cash in order not to pay VAT, the nation gets diddled,” he remarked.

Of course Hartnett is right: the tax gap, about which I have campaigned for years, and which I forced (via the TUC) onto HMRC’s agenda and in turn into national debate, is of course a major factor in the management of the deficit. Given that the gap is £120 billion that has to be true.

But let’s be clear, welcome as Hartnett’s recognition of this obvious fact is, he has ultimate responsibility for the fact that the gap is this big for two reasons.

First of all, he’s denied the size of the gap, persistently – and the propaganda his department put out under his direction about how small the gap supposedly is in his view has been used by him and his colleagues to leave this matter alone and to deny its significance. HMRC say the tax gap is just £35 billion right now (see the table, here). The numbers are grossly inaccurate for reasons I explain here, here and at length here. The consequence is obvious: too little attention has been paid to the issue and that is because HMRC worked persistently to hide its own incompetence to hide the fact.

Second, using the incorrect data his department produced Hartnett justified reducing the staff in HMRC. The numbers will fall from 100,000 in 2005 to about 50,000 in 2015. And like it or not collecting criminals requires human activity to detect and prove the crime. Tax evasion is a crime and there aren’t enough people now employed to detect much of it – so the tax gap has grown. Hartnett is responsible for that. And we see the result in cuts in services, pensions, disability living allowances, education, health, defence and so much more.

So sure, Hartnett’s right – people should not pay in cash knowing the cash will not be declared to tax authorities. But the biggest culprit by far in the creation of the massive UK tax gap that threatens our pubic services is Hartnett himself – and he’s just trying to deflect the truth by making the claims he’s now seeking to make in valedictory effort to justify his actions.

HSBC, again

Banking, Tax evasion, Uncategorized Comments Off

Jan 282012

Reuters has reported:

HSBC Holdings PLC is under investigation by a U.S. Senate panel in a money-laundering inquiry, the latest step in a long-running U.S. effort to halt shadowy money flows through global banks, according to people familiar with the situation and a company securities filing.

The inquiry being conducted by the Senate Permanent Subcommittee on Investigations could yield a report and congressional hearing later this spring, these people said. The subcommittee has a history of conducting high-profile hearings that have proved embarrassing for the world’s biggest banks.

People have suggested I am seeking to highlight HSBC’s seemingly consistent involvement in investigations of tax evasion as if I have ulterior motive.

I dispute that: I don’t need to highlight that HSBC seem to be consistently involved in investigations of tax evasion; the fact is that they are.

The question is, why is that the case?

Maybe The Rev Lord Stephen Green could offer an explanation as former CEO and Chair of the bank?

I couldn’t help but smile

Banking, Switzerland, Tax evasion Comments Off

Jan 272012

I really couldn’t help but smile at this report in SwissInfo:

Switzerland’s oldest private bank, Wegelin & Co, will sell most of its business to the Raiffeisen Group amid a dispute with United States tax authorities.

Wegelin, which was founded in 1741, said on Friday most of its clients and staff would be transferred to a company called Notenstein Private Bank which will in turn become a 100 per cent subsidiary of the Raiffeisen banking group. The sale price has not been made public.

US authorities charged three Wegelin staff on January 3 with conspiring to hide more than $1.2 billion (SFr1.1 billion) in client assets from tax officials. Wegelin said at the time that it was prepared for the “expected quarrel” and the bank had not broken any Swiss laws.

Speaking to reporters on Friday, Wegelin senior managing partner Konrad Hummler said the sale had resulted from “the extraordinarily difficult situation and threat to the bank brought about by the legal dispute with the US”.

Even the suggestion of tax evasion does not pay now.

The Swiss might, at last, be beginning to realise the truth in that obviously true statement.