High profile tax dodgers, famous sports stars and TV celebrities, millionaires are making the headlines of all national newspapers by using tax avoidance schemes, including even legal ones.
Is the public getting used to seeing how rich and powerful are taking benefit of tax loopholes? The government is certainly not, and it is preparing for a fight with tax dodgers.
According to Danny Alexander, Chief Secretary to the Treasury, the previous government’s tax system had more holes than a “Swiss cheese” and were more complex than a “Rubik’s cube” and offered varied opportunities for tax evasion.
Back in 2003, a backbench MP, George Osborne, had told a viewer of the BBC’s Daily Politics how to use “clever financial products” to get around paying inheritance tax. Later he explained that he was trying to point out to tax loopholes that people used to evade and avoid taxes. Well, today he is assuring us he shut them down.
This year in March, the government has approved measures to tackle tax evasion and avoidance and expects to raise £7.6bn in the year to April 2016.
We should also note that this time the government went even further, and they have decided to pursue not just tax evaders but those providing them with tax advice, such as banks and accountants. Now they can also be “named and shamed” along with tax evaders and face criminal penalties.
Prevention measures to crack down tax evasion
New prevention measures are tougher and provide more power for HMRC to take action:
- Tax investigation authorities will no longer have to prove intent to evade tax via offshore accounts to prosecute.
- Tax evasion will be considered a “strict liability” offence open to persecution regardless of whether there was evidence of intention to break the law.
- The government will publish lists of tax avoiders, “naming and shaming” them, and impose additional financial costs and reporting requirements on serial avoiders.
- The new rules will also give HMRC more flexibility in collecting tax even if there are some disputed issues related to this tax.
- Tax advisers who facilitate evasion will be equally prosecuted.
Are these tax evasion measures fair?
It is not as straightforward as we want to think. Patrick Stevens, Tax Policy Director of the Chartered Institute of Taxation, believes it can catch innocent people as they can be prosecuted even without a proof of “intent to evade tax.”
The UK taxation and international taxation systems are complex, and people can simply make mistakes in their financial affairs without any intention or knowledge of it, says Stevens.
These measures can certainly prevent many tax evasion cases and warn off those who want to take an unfair advantage.
After all, our tax matters are our responsibility, and we should seek professional help if in doubt.