Tax evasion investigations are going global

11th July 2017

Anyone with knowledge of the global taxation arena will know that the fight against evasion has increased substantially in recent years. In fact, new figures released by law firm, Pinsent Masons, have revealed the true extent and have shown that UK tax investigations are going global.

HMRC ups the ante

According to a study by the firm, HMRC has nearly doubled the number of requests it has submitted for help from foreign governments over the past five years. In 2010, the tax authority made 591 requests for information while last year this totalled 1,096. Inquiries rose by 7% per year to 2016 which highlights the growing focus on tackling tax evasion around the world. But why is this happening?

Pinsent Masons suggested that the increase in requests for information was symptomatic of a rise in public pressure on HMRC to pursue people suspected of evasion and of hiding income in offshore accounts. While that’s a noble suggestion, the move has also largely been driven by the huge amounts lost to evasion every year. HMRC reports that it has collected more than £2bn since 2010, highlighting the financial incentives of adopting a firmer approach.

Paul Noble, head of tax investigation at Pinsent Masons said, “Enlisting the assistance of foreign tax authorities in tax investigations is a powerful weapon in HMRC’s arsenal – one that they are not hesitating to use in their pursuit of suspected tax evaders. […] As the amount of information available to HMRC increases, they are likely to come under more scrutiny. Now is certainly the time for those with tax investigations involving overseas income and assets to correct and historical non-compliance as draconian penalties of between 100% and 200% of any unreported tax will bite after September 30 2018.”

Revealing secretive tax havens

HMRC has also made a commitment to shutting down secret offshore accounts through the use of treaties it has signed with governments that will allow for the exchange of information. The most widely known of these is the Common Reporting Standard and the UK tax authority has already begun to receive data on hundreds of thousands of accounts in the first phase of its transparency drive. A separate group, consisting of countries such as Malta, Cyprus and Luxembourg – which have all been labelled as ‘tax havens’ in the past – will make the first exchange of their data involving accounts containing more than $1m ahead of the September deadline.

Investigations go global

So far, the push to combat evasion has been remarkably successful. Last month the Organisation for Economic Co-operation and Development reported that the last major tax havens had bowed to public and political pressure driven, in part, by major leaks such as the Panama Papers. It said that ‘massive progress’ had been made and revealed that there would be no significant offshore centres on its list of ‘uncooperative tax havens’. Currently, the list contains locations including Monaco, Vanuatu and Liberia, although even these states are expected to become more compliant in the coming years.

This new ‘unified’ approach to ensuring compliance has meant that UK tax investigations are going global which has made it near-on impossible for firms and individuals to get away with committing any sort of evasion. And, with punishments ramping up, it makes no sense whatsoever for agencies to even try and escape the clutches of HMRC. As the tax authority has said, ‘there are no safe havens’ and anyone unsure of their, or their organisation’s legal status should partner with specialists before it’s too late.

What impact do you think the globally unified approach to tax will have on evaders?


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