As almost all of the media report, former Formula 1 impresario Bernie Ecclestone pleaded guilty to tax fraud yesterday.
He won't go to prison: the sentence was deferred, given that he is 92.
He has paid more than £650 million in tax for failing to declare a trust arrangement in Singapore that held more than £400 million when he had the opportunity to do so and did not take it.
How did the UK authorities discover the trust? Because, I suspect, of automatic information exchange arrangements introduced in 2017 under OECD rules.
I had long argued for such arrangements. In 2005 they were part of the first Tax Justice Network manifesto, which I coauthored with John Christensen.
In 2009 I wrote a paper on the issue after being told by HMRC that such information exchange would not happen in my lifetime. They were wrong because of the persistence of tax justice campaigners' demand for this to happen.
At the time, HMRC and others were pursuing a suggestion that automatic information exchange had to supply full details of all the information on a person's income in another jurisdiction, or it was not worth doing. I suggested that was wrong. All that was required, I suggested, was data on the fact that an account existed in another place, with minimal information (maybe) to indicate its scale. That smoking gun was all that was needed to begin an inquiry.
I suspect that this has been proved to be right. Ecclestone said he had no more overseas arrangements to HMRC in 2015. They then discovered otherwise. As a result, the fraud prosecution was brought.
This, and other such cases, will have a massive deterrent effect on offshore tax abuse, which is already down considerably precisely because of automatic information exchange. I am delighted.
But I would be happier still if we now used exactly the same methods to tackle domestic tax abuse by companies that fail to report their incomes, as I have recently proposed as part of the Taxing Wealth Report 2024. It is absurd that a method that has proven its worth internationally is not being used domestically to require UK banks to report basic data on all the companies to whom they supply banking services so that the massive fraud that takes place in the UK through the abuse of limited companies cannot be detected.
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Well said. There needs to be much more done to deal with tax fraud. Any idea as to how much is lost in this way?
HMRC suggest it is around £20bn a year. I suggest it may be three times that.
A significant breakthrough ad the result of tireless by tax transparency reform campaigners. Now we need a well resourced HMRC to collect the estimated £40+ billion of avoided and evaded tax which could be invested in creating services and infrastructure. Will Labour have the appetite?
I have been trying to settle a five figure tax liability in the UK for almost a year and a half. Can’t go into the details here but I can say that HMRC is in a state of utter shambles.
After Brexit I opted to sever all UK connections. Settling my tax liability and then closing my bank account will be the last, but it has proven impossible. It’s not as if the country doesn’t need the money. I have spent so much time on this, and made so many international calls that have timed out after 30 mins on hold the temptation to stop bothering has been real, but as a matter of principle I cannot do this.
I hope the next Labour government will resource HMRC properly.
I do too
Bernie Ecclestone committed a very serious crime worth £650 million. He gets a suspended sentence.
A poor person (that’s pretty much everyone else relative to Mr Ecclestone) may commit a vastly less significant crime and get a prison sentence.
The scales of justice are heavily weighted in favour of the rich.
Perhaps that is why the country has run out of prison places under this Conservative government.
Another case in point: the Channel 4 programme Partygate, which I watched yesterday, concludes with the observation that the average fine for breaches of covid regulations was £600, some amounting to over £10,000, while disgraced former prime minister Boris Johnson and current PM Sunak were given £50 penalty notices.
I am watching the covid inquiry. Johnson and friends are going to get their comeuppance soon, don’t worry. They will still be young enough to go to prison for what they have done.
https://www.theguardian.com/politics/2023/oct/13/police-issue-fines-covid-breaches-tory-party-attended-shaun-bailey
Some more fined. Only small fines, I presume, as they won’t tell us who and what, but it shows it’s still happening.
Yes, company name and number with cash balance should be trivially easy for a bank to pass on to HMRC. Collate this with tax paid and last date of filing at Companies House you get a ‘long list’ of companies to investigate.
Probably, too long…..
However, it would be a powerful incentive for directors to take their obligations seriously.
Easy to stratify. Start with those claiming to be dormant that have large bank transactions and move on from there….
And hoe much does sending a nudge letter cost? Not a lot. I’d like to write it…..
It is all surely a function of investment in HMRC and other regulators; and the degree of independence from political interference they possess. I would look at it this way: the missing public income is say, £20Bn (HMRC); Richard puts that at £60Bn. HMRC will be cautious (from egg-on-face fear and underinvestment-negativity syndrome); but even at £20Bn (any cautious businessman prefers an easy target), so it must be worth at least £2Bn (minimum) investment to produce that return. I do not propose higher because that will soon enough gobble most of the available, even trainable expertise required; more would probably simply inflate the price of achieving very little more.
If you don’t tax, democracy gets lax!
I’ve long suspected that many dormant companies trade happily reporting no activity.
The problem is that the way neoliberal Conservatism works; it discovered a long time ago that changing the law to eliminate inconvenient taxes was very hard work, and is accrued out in the cross-hairs of national publicity. It is too difficult to achieve the legal but unscrupulous economic environment they seek, and wish to thrive. It is far easier just to starve the regulators and their police of the resources to do a competent job; the problem simply disappears, and they cut public expenditure, a double benefit; and hardly anyone even notices.This is gold star neoliberalism. Job done.
‘Achieved’ not ‘accrued’. That was autocorrect not me. Honestly it is far, far worse than leaving the blooper in place.