New penalties have been laid out by chancellor George Osborne for people who avoid paying tax by keeping their funds abroad. Those who commit this kind of tax evasion could now face bigger fines and be more easily jailed.
At present, tax officials have to clearly show that the owner of offshore funds was intentionally dodging tax before a prosecution can be brought against them. Should these new rules take effect, however, proof that tax evasion was the intention will no longer be required. The only facts officials will have to establish in order to bring a prosecution is that funds are taxable and have not been properly declared.
Under the current system, fines for people found to have avoided tax by not declaring offshore funds can amount to double the amount that they owe. This can be accompanied by criminal prosecution, and potentially by a jail term. The government is now looking at possibilities for increasing these punishments, and to introduce new criminal standards for those who conceal funds offshore for the purposes of tax evasion.
Tax has been a hot topic for the government lately, with a number of information-sharing deals struck over recent months to help identify those hiding funds offshore. The idea behind these latest proposals is, at least in part, to make the law into a more effective deterrent against offshore tax evasion, and to send out a message to criminals. According to Osborne himself, “the message is very simple – if you’re hiding your money offshore, we are coming to get you and the criminal law is going to come and find you.”
Plans are also being considered that could see financial rewards given to those who “help uncover” taxable assets that have been hidden oversees. In other words, there could be financial incentives for those who have the chance to expose offshore tax evasion.
In spite of these plans to tighten the law, Labour maintains that the current government is “failing to tackle tax avoidance and evasion.” Shabana Mahmood, the opposition’s shadow exchequer secretary, pointed out that last year saw an increase in uncollected tax and that the information-sharing deal with Switzerland did not even raise a quarter of the predicted amount.
“At a time when families are facing a cost-of-living crisis and the deficit is still high,” said Mahmood, “this simply isn’t good enough.”
There has also been controversy over the fact that people might be jailed under the new law based on liability alone without proof of intent. However, Ray McCann of law firm Pinsent Masons believes that the laws would be intended to encourage people to come forward about tax evasion, in which case the policy is usually not to prosecute. McCann said that he “would be surprised if we see an increased number of people ending up in the dock and very surprised if any of them were being sent to prison as a result.”
The public will have the chance to voice opinions on these plans as a consultation is going to be held.