Inland Revenue continues to crack down on tax evaders
According to reports in the Sunday Times, the head of the UK Inland Revenue, David Varney, has established a specialist unit targeting the offshore banking activities of certain high-net-worth individuals. It is understood that a specialist team of around 30 tax inspectors has been assembled to investigate suspected evaders, working under the Offshore Fraud Project, part of the Revenue’s Special Compliance Unit.
The report indicated that Varney’s team has identified several well-known figures from the business world, City high-fliers and other wealthy individuals who are alleged to have hidden their assets offshore. The investigations will be concluded in the coming months and prosecutions may result from the more serious cases.
This latest development on the enforcement front comes as the government has stepped up its anti-avoidance campaign, pledging millions of pounds in new funds to help fight evasion. Varney has pledged to get tough against those who abuse Britain’s tax laws.
The Inland Revenue has apparently applied pressure to offshore banks and financial institutions with a UK presence to deliver a list of offshore accounts. According to the report, it will also focus on the use of credit cards connected to these accounts by obtaining details of transactions in the UK.
It was also revealed that the Treasury is initiating a review into tax compliance, which is likely to result in Revenue officers being given new powers of investigation and armed with tougher penalties. According to Treasury minister, Dawn Primarolo, measures are already in the pipeline aimed at strengthening the compliance regime with the creation of a 100-strong anti-avoidance team within the newly merged Customs and Revenue department.
America gets heavy with tax avoiders
Across the Atlantic, the US tax authority, the Internal Revenue Service (IRS), has also become tougher. In 2004, it instigated a record number of investigations against both individuals and companies and recouped more unpaid tax than ever before.
According to IRS figures, its enforcement agencies collected over 43 billion dollars in evaded tax last year. One in six companies with assets of 10 million dollars or more were investigated, an increase of 2,000 firms on last year. However, they admitted that figures were still too low and that they “have more work to do”.They are likely to be even tougher this year.
They are also likely to share their successful methods with the UK, as the two countries, along with Australia and Canada, have set up a joint task force for this very purpose.
Gibraltar to phase out tax regime before 2010
Gibraltar has been given until 2010 to phase out its exempt company tax regime after the European Commission ruled that the scheme violates EU state aid rules.
The decision means that existing firms will continue to benefit from exempt company status until the end of the decade, although it remains unclear what tax incentives the jurisdiction will be able to offer new firms seeking to establish themselves there.
Meanwhile, Gibraltar must wait at least two more years for a European Court of Justice decision regarding the replacement to the exempt company regime, which has also been rejected by the Commission on state aid grounds. It was reported by the Financial Times that the UK has accepted the Commission’s decision on the exempt company phase-out, in order to bring closure on the dispute, which has raged for more than five years.
In his New Year address, the Chief Minister of Gibraltar, Peter Caruana, had warned that the jurisdiction’s economy could be devastated if the EU carried out its threat to abolish the exempt company tax regime and force the Rock to adopt UK tax rates. He said that the biggest threat by far came from the European Commission’s “misconceived” view that Gibraltar effectively constitutes part of the UK for tax purposes and must, therefore, adopt UK taxes: “This last issue is absolutely crucial to Gibraltar’s future economic success and, therefore, social and political success. To speak of exaggerating the impact of this suggests, at best, a total lack of understanding of the issues and their consequences and implications for Gibraltar.”
France repeats call for International Development Tax
The French government has, once again, raised the issue of an international tax to create a pool of funds that could be used to fight global poverty and provide aid and relief to disaster-stricken countries.
Writing in a French newspaper, Foreign Minister Michel Barnier voiced support for proposals put forward by Chancellor of the Exchequer, Gordon Brown, who has called for the establishment of an International Finance Facility which would use the capital markets to double aid budgets. Barnier also believes the idea should be supported by an international levy on global business.
“France, in partnership with Brazil, Chile and Spain, proposes that this mechanism should be complemented by the creation of international contributions, voluntary or compulsory, raised on the wealth generated by globalisation,” he stated.
French President Jacques Chirac has been a long-time advocate of an international tax to help fight third world poverty and fund development projects, although his enthusiasm has not in the past been matched by the leaders of other industrialised nations.
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