The Public Accounts Committee report on the Hidden Economy highlighted a few unusual statitics. Take this for example:
Q: How many people were prosecuted for TV licence evasion in 2005-6?
A: 157,452. (The Television Licensing Authority claims a 99.9% conviction rate.)
Q: How many people were prosecuted for tax evasion last year?
A: 69.
Or this:
MP: Our friends in the Department for Work and Pensions are prosecuting 60 cases per thousand benefit fraud cases. You are only prosecuting two cases per thousand hidden economy cases. I am not suggesting that you should rise to the level of 60 per thousand but two per thousand is very low, is it not? This is a tiny chance of being prosecuted if you are in the hidden economy. These are people deliberately evading paying tax.
Taxman: It is a low number and we do have plans to increase it when we can apply the skilled resource to it.
Or this:
MP: What... schemes are you going to use in the future to try and tackle the hidden economy, particularly at the upper end of the scale?
Taxman: We have got several things going on. We have got more than 20 projects. We are trying to do the same with builders and decorators and the like by matching publicly available information, maybe advertisements in the Yellow Pages or elsewhere, with our databases. That tends to be at the lower end. At the upper end of the scheme we have a project looking at barristers, for example 57 barristers who were in the hidden economy at some time in recent years.
MP: What, barristers doing legal work in this country perfectly normally are not paying any tax at all?
Taxman: Not paying any tax.
I admit the latter is shocking. I can see no reason at all for not prosecuting a barrister who is not declaring tax. I believe it the government's duty to have them removed from the Bar. The evidence is clear: there is one rule for the rich and another for the poor here.
Plato said:
When there is an income tax, the just man will pay more and the unjust less on the same amount of income.
I accept this is likely to be as true now as when Plato wrote it. But it is the government's job to tackle that abuse, and it is not clear it is.
Which makes it even harder to understand why they are so aggressively closing tax offices that contain the local knowledge needed for this work and sacking staff who have the experience to do it.
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Whilst I am all for more prosecution, because of the deterrent factor and because laws are demeaned in value if sanctions for their breach are not upheld, some further scrutiny of this particular issue may be merited. Firstly, the average settlement of £20K per person is hardly earth shattering compared to the millions the Revenue routinely let’s slip through its inept fingers on a daily basis. Secondly, if you think the Bar is, as a profession, rich, you are sadly mistaken. The criminal and family bars are full of practitioners who, as a result of government reforms of legal aid, are struggling to make a meagre living and it is certainly not unknown for practitioners of some seniority to be moonlighting out of financial necessity. You can make your enquiries and, if you did, you would find that there are plenty of establsihed barristers in these fields who will make less profit each year than the wage received by a trainee chartered accountant in the provinces. This is not to excuse non compliance with the laws but to paint ignorantly such persons as rich will only serve to detract from any worthwhile debate.
Andrew
Prosecution is not a matter of cost effectiveness. It is a deterrent in itself. That is why it is important. I am certain that pursuing more investigation cases with vigour, and doing more prosecutions would increase the rate of tax compliance. the fact is that at present the ‘ man down the pub’ he said he got away with it is to commonly right on this issue. Whilst I wholeheartedly except that the Revenue do let millions slip daily, very largely in the large business sector, and I remain baffled about why that is their policy, as seems to be the case, this does not mean that an average settlement of £20,000 can be ignored. Far too few such settlements are made.
As to barristers you entirely miss my point. I made no reference to wealth. I am making reference to the fact that they have no excuse for not knowing the law and do have a duty ( I would suggest a higher duty) to comply with it, which if they breach it should result in their being disbarred. It is you, I think, who has made the error of judgement in assuming that wealth is the criteria I was using in choosing to present that exchange.
Richard
[…] of their responsibility. So what happens to them? Richard Murphy at the Tax Research UK blog has uncovered figures which show an entire 69 people have been prosecuted for tax evasion in the last year. Ummm poor people cheating on benefits are […]
Richard Post 1 -The evidence is clear: there is one rule for the rich and another for the poor here.
Richard Post 3 – As to barristers you entirely miss my point. I made no reference to wealth.
Dictionary definition of Rich – having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy: a rich man; a rich nation.
I await your New Labour style spin on this apparent contradiction.
Infrequent Observer
OK – for the pedants – tax evasion requires there to be taxable income – and is not being pursued
Benefit fraud is largely related to low income – and is pursued, with vigour
But let’s leave this point aside and let’s talk barrsiters
BDO reported in 2002 that ‘The overwhelming majority are paid at least £53,000 before tax.
The average earnings of a barrister with over 10 years in the profession was £88,000.’
http://news.bbc.co.uk/1/hi/uk/2487463.stm
This does not mean some earn not a lot – I know that is true
But £53,000 average puts the bar well into the top 10% of earners on average
And like it or not, top 10% is probably rich in most people’s book
Maybe not yours. But most people’s, yes
Richard
Richard,
My observation was about reference to wealth and your assertion you made no mention of it. I believe you did. Your response is as expected and appears to ignore the contradiction (which was my only point) instead shifting the focus to another issue.
Infrequent Observer
IO
OK – so I’m human
And what I write (usually rather quickly) is open to interpretation in ways that I do not expect
You win if you like – I apologise to all if I got this wrong (because it was not my intention to make the point that has been read into it)
Richard
I assume the bottom line of Richard’s post is the imbalance to the enforcement of stopping fraud of tax payers money, compared to the fraud (as that is what tax evasion assentially is) of not paying all the taxes you are liable to your taxable income.
I really haven’t got an answer for this, just that the person or agency that has the money you have more contraol and idea of where it goes, that what may be due to you. So it is easier to investigate and prosecute benefit fraud or non payment of licences than it is to find tax evaders.
A bit like it is easier for policy to catch motorists breaking laws than murderers, and government has a greater affinity to fighting crime on a cost/benfit ratio, rahter than a punitive action. Which is a wee bit deppressing.
Richard
You are too generous in your apology to Infrequent Observer. The generalisation you made is true.
It would seem contrary to HMRCs stated prosecution policy for barristers to be ‘let off’, but the reason may be that there are ‘bigger fish’ to be dealt with, and precedents are being established. I am talking about senior government figures and, it is rumoured, members of HMRC and other Government Departments. I would have to suspect that this would be those brought in from the Private Sector.