George Osborne is planning to make it easier to impose jail terms or heavy fines on British residents using offshore tax havens to cheat the exchequer out of billions in revenue.
The chancellor, who is in Washington at the International Monetary Fund's spring meeting, has drafted a criminal offence of failing to declare offshore income as he steps up a long-running campaign to crack down on tax dodging.
At present, HMRC has to prove a British resident has deliberately sent funds abroad to dodge tax. The need to prove intent has undermined several prosecutions and allowed those under investigation to escape with only light fines, Treasury officials said.
Now, I am not someone who is likely to oppose a clampdown on offshore tax evasion, but this statement is very odd.
First of all, there is already a criminal offence for failing to declare offshore income. That offence occurs when a tax return is submitted without the income included upon it. Making a false declaration that the tax return that has been submitted without that information is complete is, in itself, an offence, and therefore it seems hard to see why another offence is needed.
Secondly, it is not necessary to prove intent in the case of tax evasion cases: failure to declare the income is sufficient to prove that evasion has taken place. I do agree that there are offences relating to the movement of assets offshore where intent is a factor, but to suggest that these cover all tax evasion situations is misleading.
Thirdly, I will be curious to see what the proposed offence is. It cannot be the case that having an offshore bank account is, in itself, illegal. That would be contrary to EU law, and even I have never argued that having an offshore bank account is, in itself something that should be considered an offence. It is the use of those accounts that is important. But, in that case, Osborne is going to have to fall back on some form of failure to declare to create the offence that he wants: I suspect that failure to notify the existence of an account will now be an offence, but if that is the case this is no different in substance from failure to notify income arising on that account on the tax return, which is already an offence, as I note above.
In that case, whilst I have an open mind until I see the consultation document, this looks very much more like a PR exercise than it does to be a serious attempt to tackle offshore tax abuse.
And let's remember, some of the most serious offshore tax abuse which is of greatest public concern relates to the use of tax havens by multinational companies, and this is something that George Osborne has gone out of his way to encourage. The duplicity of his approach is staggering.
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Very much a la ‘migrant workers won’t be able to claim benefits for 3 months’: just spinning a situation that already exists as a tabloid pleasing comforter.
I’m not a criminal law guy, but are you sure there’s an offence for failing to declare offshore accounts/income? Penalties, yes, but an offence? I had thought that you needed to show intent/dishonesty in order to establish an offence – and that was why prosecutions often fail. If it’s being proposed that having an undeclared account is automatically an offence (as I think is the case in Italy) then this difficulty would go away.
But very hard to tell from the announcement, as it’s so non-specific.
The offence is signing a false tax return
There is intent in that
All the laws in the land are meaningless if HMRC is still losing staff. A proposal to adequately staff HMRC i.e. Employ more staff would be much more meaningful. Anything else is just window dressing.
Agreed, entirely
The HMRC know how much I am paid, yet they want me to tell them. The HMRC will soon know how much is in my Jersey bank account. THE HMRC know what interest payments I am given from my banks. What the HMRC needs are better computer systems to help make sure the forms are filled correctly.
I agree that there is logic in HMRC pre-filling forms with data they know and sending out for confirmation.
This happens in Sweden
But they cannot know everything, by a long way
OK – but doesn’t that rather suggest that making it strict liability (i.e. intent irrelevant) is rather a good idea, when people fail to declare an offshore account? Might be bleating it’s unfair, but in reality anyone opening an offshore account should know full well they’re expected to declare it. So if that’s what they’re doing it’s a good idea, but of course it may not be…
But Fraud Act already covers this
no it doesn’t – the Crown still needs to prove intent. This is in practice not so easy to do beyond resaonable doubt, as juries tend to be sympathetic to defendants who say it was all a huge mistake. So I think you are quite wrong to say that removing the requirement for intent is no change – it is a very significant change.
Politely, you’re talking nonsense. To suggest a half decent prosecutor could not win these cases is absurd
On the other hand, juries find people charged under unjust law not guilty
I think the difference between us is that I have no expertise in criminal tax prosecutions and say so. You don’t either, but make very confident statements about the ease of proving intent which any first year law school student will tell you are just wrong. Harry Redknapp is a case in point – but to go further than anecdote one woud need to look at statistics for prosecutions and convictions and see what story they tell. It would be sensible to hold fire until one is actually in possession of the facts.
I am willing to see the consultation
But you may not think you have the knowledge of a first year law student
I do
Ever since BBC lead on this item every time I heard/saw it this morning, I’ve been wishing for your response, Richard, so I can post to Facebook. And the opportunity to wish you well too.
Submitting an incorrect tax return is generally treated under a regime of civil penalties. It is only in extreme cases that HMRC will consider criminal investigation, probably because it is so hard to obtain a criminal conviction – burden of proof, establishing intent etc. It will be interesting to see if there will be more criminal prosecutions or whether the threat of a criminal prosecution results in taxpayer acquiescence to a harsher civil penalty.
I can’t see how anything clearer than section 2 of the Fraud Act can really be delivered
But section 2 still requires proof of intent to commit fraud. Signing an incorrect tax return is not by itself proof of intent. As I understand it, the proposal will mean that signing a tax return with undisclosed offshore income will be an offence.
My point is it already is
Clearly the courts don’t share that view.
Have the courts been asked?
Redknapp was quite high profile… But that aside, signing an incorrect statement is not proof of intent, at least not proof to a criminal standard.
Why isn’t it proof of intent?
This is interesting. The present system doesn’t work, we know that you told us. People are forgetting about their money in the Cayman Islands. Even whilst taking their girlfriends to the BVI.
So when the government expands the deterrent, you are against it. Which is odd.
The difference between a slap on the wrist, which at the moment is what happens. Instead they are suggesting criminal charges, which is better. How can that be wrong, many will not want to take the risk.
I am not against reform: I am pointing out that this reform may be no such thing and could just be political gesturing
I also admit to having problems with anything that imposes a penalty automatically
I do not think mistakes happen in declaring offshore income, especially when substantial sums are involved. But there has to be a right of appeal. Justice is a two way process and has to be seen to be done
I sign a statement that I believe is correct, but it later turns out that the statement was incorrect. Your logic is that I knew it was incorrect when I signed it and on that basis alone I should be convicted of fraud? Talk about guilty until proven innocent…
Better than what the government is proposing
And – if you had an account and did not declare it then your claim is ridiculous
I agree it is possible to find that you have acted in good faith and matters on which you had to make assumptions changed
This is not what we’re talking about here
I agree that if I completely omitted the income from an offshore account or portfolio over many years then that would be a challenging position to defend (although as a defendant I don’t have to prove anything), but what if I omit some of the income – e.g. I omit income believing it’s taxable in the following tax year and have every intention of declaring it on the next tax return. Would you agree that I signed the declaration in good faith believing it to be correct and complete even though it omitted income?
Actually you do have to defend something – you made a false statement
You do not have to give evidence
But that would be a defence
If you take items from a shop that you don’t pay for, you get a criminal record and dragged through the court system.
Not pay tax a slap on the bum.
So is it fair to say that simply signing an incorrect tax return does not prove intent, that you may need to provide corroborating evidence?
I draw your attention to comments policy para 5
You are becoming tediously repetitious
Further similar comments will be deleted
Richard
Apologies if you’ve already had this reply – not sure if I submitted it correctly the first time round.
Obviously it’s your blog and it’s not my intention to provoke for the sake of it. My concern is that your comments suggested that signing an incorrect tax return was itself sufficient for a criminal conviction – i.e. The act itself proves intent. I would find that a disturbing development in our criminal justice system.
However, I shall leave the matter at that and wish you well in your recovery.
Watch the hands everyone. Osborne is performing another conjuring trick!
He’s finished playing with the great debt bubble blowing machine to create an illusion of economic prosperity.
Now Osborne moves on to putting “Hector the Taxman” in box. After sawing both his arms off ….I’m not sure that was in the Magic Circle repertoire……. Osborne attempts to hand Hector a stick to beat people with?