Posted on 25/04/2014

Chancellor to crack down on offshore tax evasion

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George Osborne is to implement stricter punishments for those found to be avoiding taxes by hiding their money overseas. To prosecute people presently, tax officials must prove that a person is holding money offshore, and then find evidence that they intended to dodge taxes. The new criminal standard, however, means authorities can now prosecute without proof of intent, when they find undeclared, taxable money offshore.

Stern talk
The Chancellor made it clear that the government would not tolerate people taking advantage of loopholes in the system. Speaking at the spring meeting of the International Monetary Fund, he said: “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."

Hyperbole or scaremongering?
The fighting talk from Chancellor Osborne was met with mixed reactions, with some experts saying the proposed changes could see innocent people given prison sentences. The head of tax at Deloitte, Bill Dodwell said it was ‘horrifying’ that people could be incarcerated without proof of intent. “I'm shocked to find that an offence which could lead to a prison sentence could be decided on a strict-liability basis.”

Others thought the government was trying to encourage people to come forward. A tax partner at the law firm Pinsent Masons said: “I think what we'd probably be seeing here would be a sort of lower level criminal offence, largely intended to give further encouragement to those who have been evading tax to come forward. I 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.”

More of the same
Despite the Chancellor’s strong rhetoric, it is unlikely that more prosecutions will be made. In reality, the government only managed to collect £800 million in avoided taxes last year, as opposed to a predicted £3 billion following a tax deal struck between Britain and Switzerland in 2011. However, the fact that the rules appear stricter on paper could, indeed, see more people deciding not to evade taxes in the first place, and this could save Britain up to £750 million a year.