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Tax Evasion, Tax Avoidance and Politics

As election fever intensifies, politicians from all sides of the spectrum are clamouring to (once again) attack the financial sector and wanting to be seen playing the “tough on crime” card.

The Chancellor, George Osborne is now promising to bring in new financial and civil penalties for bankers and accountants who aid and abet tax evasion and aggressive tax avoidance as part of the Budget and so conveniently before the general election.

But does this add up or is this more a case on knee jerk politics in the scramble for votes?

Tax Evasion and Tax Avoidance Explained:

Tax Evasion is the dishonest non-payment of tax that is properly due. It is a criminal offence and can lead to a lengthy prison sentence.

Tax Avoidance is the lawful reduction of a tax liability by properly applying relevant rules and regulations.

As it is lawful should the fact that it might be viewed as “aggressive” lead to penalties being imposed on those who properly apply the rules. Surely the UK Government should draft its tax rules more tightly rather than seek to penalise those who, lawfully, exploit their weaknesses.

If the target is criminal tax evasion, then the new proposals again appear to miss the point. As Lord Macdonald, the former Director of Public Prosecutions, has forcefully pointed out, if banks or others have participated in or assisted a client to evade tax they can be prosecuted as participants in a conspiracy to cheat the revenue.

This is a long established and frequently used common law offence that carries an unlimited sentence, so the more serious the offending the greater the penalty the Courts can impose.

Is the new regime promised by the Chancellor civil or criminal? If civil then by definition it is of a less serious impact then a criminal regime. If the aim is to hold people or organisations to account for criminal conduct, imposing a civil sanction in response to criminal conduct is not exactly an obvious way of sending out a tough message.

If the new regime is criminal, then criminal offences are seldom retrospective and so any new law would be unlikely to catch behaviour that has already occurred.

If criminal conduct has occurred the existing law can deal with it. If the conduct was undertaken by individuals who are sufficiently senior to represent the controlling mind of a company then the company itself can also be prosecuted and face an unlimited fine.

The reality of the new measures now proposed is that they have been formulated in haste in order to sate the febrile need of apparatchiks seeking to return political masters to power. History though shows that rushed laws are bad laws.

If crimes have been committed then there is already law there to deal with it. Of course any prosecution would not be until after the election, and therein lies the rub.

For more information or a free initial consultation with a Business Crime Lawyer call Slater and Gordon Lawyers 24/7 on freephone 0800 916 9054 or contact us online and we’ll be happy to help you.

Slater and Gordon Lawyers have over 1,450 staff and 18 offices in London, Manchester, Liverpool, Sheffield, Birmingham, Edinburgh, Cardiff, Milton Keynes, Merseyside, Bristol, Newcastle, Halifax, Wakefield, Derby, Cambridge and meeting rooms in Bramhall, Cheshire and in Hull, Yorkshire.