Reuter's Purlitzer prize winning journalist David Cay Johnston has written on my work for the Tax Justice Network on worldwide tax evasion. That work estimated a total loss to tax evasion of US$3.1 trillion world wide. The review included an excellent graphic of the top-10 countries by amount of tax evasion, set up against the size of their informal economies:
As David Cay Johnston writes:
A new report from London and President Barack Obama's statements to “60 Minutes” show financial crimes spreading like wildfire and governments failing to stop them.
Tax evasion equals 18 percent of global tax collections, a new report by British accountant Richard Murphy shows. His report for the Tax Justice Network cleverly lined up a World Bank Report on the size of shadow economies with a Heritage Foundation report on average tax burdens by country to reach that figure.
Murphy's $3 trillion estimate, 5 percent of the global economy, shows how a combination of weak rules on accounting and disclosure combined with inadequate budgets to enforce tax laws impose a terrible cost on honest taxpayers and the beneficiaries of government service.
This graph demonstrates quite well that developed countries are not insulated from the harms of tax evasion. They are losing important revenue right up alongside the largest developing economies.
But the sting was in the tail of the piece, and refers to comparisons between these figures and banking fraud in the USA:
Financial theft is a growth industry because of government failures that I would attribute to excessive reliance on the financier class for advice, campaign donations and absurdly well paid jobs for officials between their government jobs.
Will the next journalist who interviews President Obama please press the issue: where are the banking fraud prosecutions, Mr. President? And don't let up until the president picks up the phone and tells Attorney General Eric Holder he wants a 1,000 or more major felony indictments in the next nine months.
I think that demand appropriate.
But it would be as appropriate to call for more tax fraud prosecutions too. It is the threat of prison that stops tax fraud; nothing much else does, especially with professional advisers. It's time to get tough.
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Unfortunately banking fraud and tax fraud are where the money is these days and that’s what it takes to get elected. Witness the way Ron Paul who wants to bring the banksters to account is being occluded from media coverage in America. If Obama were to declare war on the tax and banking fraudsters he’d probably be declaring war on his own backers, so, not very likely then.
i think the threat of a professional advisor losing his practicing certificate for tax fraud is a pretty strong incentive.
plus we do actually proesecute and imprison people for tax fraud (maybe not enough, but it does happen – harry redknapp is up before southwark court next month for tax evasion for example).
Anyone can practice tax without a practicing certificate so what you suggest is toothless
Not as strong an incentive as lining ones pockets big time it would seem or they wouldn’t be doing. Although Richard is right about practicing certificates in relation to tax, one does need such a certificate for audits and to practice as a chartered accountant. The threat of losing that is also self evidently no deterrent either. The self policing of the accountancy profession is a long winded self serving process that is like being savaged by a dead sheep to borrow a phrase. The fact is the UK system of tax fraud deterrence for professionals through the threat of criminal prosecution has become a sick joke when compared to the treatment of tax credit cheats. Making new laws is no solution either, if we enforced the existing ones there wouldn’t be a problem.
At least the USA does prosecute its banking fraudsters http://www.bbc.co.uk/news/business-16228158
Here in the UK we turn a blind eye.
Actually we don’t turn a blind eye.
They get to pay larger political contributions as a punishment, and have to have retired members and senior public servants as employees.
Then when their punishing contributions get really large they get offered seats in the lords to ease the embarrassment of having to explain where all the money came from (Hint: Us)
Anthony Hitlon article from the independent
Anthony Hilton’s Week: The tax-exile hedgies cowed into seeking a sneaky return
Leona Hemsley, a New York socialite of the 1980s, is today remembered for only one thing. When indicted and subsequently jailed for tax evasion, she was quoted as having said: “Only the little people pay taxes.”
Reason prisons are not full of fraudsters is that the SFO is overrun with fraud and cherry pick the cases based on effective prosecution and collection. It is a bit like saying the Police will not bother with those crimes if the value of the stollen items is below a limit say £10,000.
This is the problem the enforcers are looking to get big hits and the junior officers know that it is a waste of time to follow up fraud as their bosses will not sanction time being spent on them.
In the case of larger frauds in the case of Ambani’s and UBS there is no political will to send the subscribers to the political funds to prison.Who will then bother paying bribes ?
The Politicians as ever are not protecting their customers, the publioc. Instead they want money both for self,now and for reelection in the future, so the corruption goes on without punishment.
For example, in today’s FY (Money) the crazy thing is that the fines charged on the Banks is being used to reduce the Banking levy ie reducing the Banking levy.
In the case of HSBC being fined millions for miss selling to old people bonds which were useless investments, considering the customers age. Can not see the HSBC Board resigning or being sent to prison. worse still the market has become immune to these fines as par for the course.
No one is accountable for these financial crimes (pass the buck in Honk kong Ivory towers)
The shareholders are the Pension funds who do not care, as long as the dividend does not stop.
Take the case of New International now it appears the e mails were sent to James but he had better things to do then read about, how wide spread the fraud was. After all just cl;ose the paper down and move to New York. Too busy to go to prison.
For three years I have pondered the Queen’s question, and the answer. (LSE was institutionally flummoxed; a year later, it gave her a waffly reply, that “everyone thought they were doing the right thing,” and that “wishful thinking was combined with hubris”.) It resurfaced last Tuesday with the publication of the Financial Services Authority report into its own conduct of the 2008 collapse of RBS and the attendant chaos. It is like expecting the Cosa Nostra to investigate the mafia. We are all sinners, ruminated the FSA, and need forgiveness, but no one was really to blame. It is a rough old world
http://www.guardian.co.uk/commentisfree/2011/dec/15/recession-bankers-economists-ignoring-history
Simon Jenkins in the Guardian
This is the best example of an utterly irrational society. Even people on the right would accept that your ability to apply your moral choices to avoid criminality is influenced by environment: the greater your life choices, the greater your chance to avoid doing anything criminal.
Yet when people who have enjoyed a most privilieged background do something criminal do they get a proportionate sentence ?
Instead we are told that it was a financial crime only, there was no physical violence & it would serve no purpose to jail them as the loss of face has been punishment enough.
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