Criticism of HMRC’s failure to prosecute HSBC Swiss tax evaders has been quite unfair, writes Jonathan Fisher QC (Devereux Chambers). There are problems with criminal prosecution and the decision to focus on tax collection through civil settlement is the right one. It makes little sense to criminally prosecute these cases.
The starting point for HMRC is that it is a revenue gathering body and not a prosecuting authority. Maximising tax recovery with minimum outlay is the paramount objective, and historically, even where dishonest tax evasion has occurred, HMRC has preferred to cut deals with taxpayers rather than invoke the criminal process. Civil settlement guarantees a favourable financial outcome, whereas in a criminal prosecution the verdict lies in the hands of a randomly selected jury. Criminal trials are lengthy, expensive and labour-intensive, with little chance of recovering outstanding tax through the confiscation regime. The House of Commons Public Accounts Committee reported in 2013/14 that the confiscation regime secured collection of only 26 pence out of every £100 generated by criminal activity. In so far as Swiss tax evaders are concerned, through making civil settlements HMRC has already recovered £135m in unpaid tax and penalties.
HMRC’s approach is entirely consistent with its broader attack on offshore tax evasion which offers dishonest tax evaders an opportunity to make a civil settlement and side-step criminal prosecution. With increasing international exchange of information, the difference in moral turpitude between a taxpayer who discloses his hidden assets prompted by the introduction of an HMRC disclosure facility and a taxpayer who makes full disclosure of his hidden assets prompted by notice of HMRC’s receipt of HSBC’s Swiss records is not clear-cut. In the case of the Lichtenstein disclosure facility, recovery from dishonest tax evaders has already amounted to £1,023m, with a further £100m received on account in cases where settlement remains to be finalised.
There are potential issues for HMRC if it seeks to rely on HSBC’s Swiss records in a criminal prosecution. Although the French authorities have given permission allowing use of the information for investigating criminal offences, problems remain. In many cases, the evidence amounts to little more than a bank statement establishing the existence of a bank account, with details of the balance, debits and credits. In the absence of an explanation from a taxpayer who has a choice whether or not to co-operate with HMRC’s enquiries, it is impossible to determine the source of assets and whether or not the account-holder has dishonestly concealed his liability to tax. Incontrovertibly, the HSBC material has been stolen and represents criminally obtained property in HMRC’s hands. It is, therefore, open to a taxpayer to argue that a prosecution should be stayed for abuse of process or alternatively the documents should not be admitted into evidence because they have been unlawfully obtained.
It is unclear whether Mr Falciani tried to sell the stolen information, but whatever the position Mr Falciani has been indicted by the Swiss federal government for violating the country’s bank secrecy laws and for industrial espionage. His extradition is presently being sought by the Swiss government. Then there is the issue of delay. The information came into HMRC’s hands more than five years ago. Also, following the torrent of publicity directed at HSBC’s role and Baron Green of Hurstpierpoint’s conduct in particular, a question arises as to whether a taxpayer can get a fair trial.
One criminal prosecution has been brought based on Mr Falciani’s documents. The case involved Mr Michael Shanley, a property developer whose fortune was estimated at £132m. In July 2012, Mr Shanley pleaded guilty at Wood Green Crown Court to evading £430,000 of inheritance tax and he was fined £469,444 in fines and costs. He had voluntarily paid £387,000 to HMRC before the prosecution was brought. Apart from a small number of news items, the case attracted little attention. What did HMRC gain from bringing this deterrent prosecution? I suggest the answer is none. When Opportunity Knocks, HMRC has been right not to open the box but to take the money.
Criticism of HMRC’s failure to prosecute HSBC Swiss tax evaders has been quite unfair, writes Jonathan Fisher QC (Devereux Chambers). There are problems with criminal prosecution and the decision to focus on tax collection through civil settlement is the right one. It makes little sense to criminally prosecute these cases.
The starting point for HMRC is that it is a revenue gathering body and not a prosecuting authority. Maximising tax recovery with minimum outlay is the paramount objective, and historically, even where dishonest tax evasion has occurred, HMRC has preferred to cut deals with taxpayers rather than invoke the criminal process. Civil settlement guarantees a favourable financial outcome, whereas in a criminal prosecution the verdict lies in the hands of a randomly selected jury. Criminal trials are lengthy, expensive and labour-intensive, with little chance of recovering outstanding tax through the confiscation regime. The House of Commons Public Accounts Committee reported in 2013/14 that the confiscation regime secured collection of only 26 pence out of every £100 generated by criminal activity. In so far as Swiss tax evaders are concerned, through making civil settlements HMRC has already recovered £135m in unpaid tax and penalties.
HMRC’s approach is entirely consistent with its broader attack on offshore tax evasion which offers dishonest tax evaders an opportunity to make a civil settlement and side-step criminal prosecution. With increasing international exchange of information, the difference in moral turpitude between a taxpayer who discloses his hidden assets prompted by the introduction of an HMRC disclosure facility and a taxpayer who makes full disclosure of his hidden assets prompted by notice of HMRC’s receipt of HSBC’s Swiss records is not clear-cut. In the case of the Lichtenstein disclosure facility, recovery from dishonest tax evaders has already amounted to £1,023m, with a further £100m received on account in cases where settlement remains to be finalised.
There are potential issues for HMRC if it seeks to rely on HSBC’s Swiss records in a criminal prosecution. Although the French authorities have given permission allowing use of the information for investigating criminal offences, problems remain. In many cases, the evidence amounts to little more than a bank statement establishing the existence of a bank account, with details of the balance, debits and credits. In the absence of an explanation from a taxpayer who has a choice whether or not to co-operate with HMRC’s enquiries, it is impossible to determine the source of assets and whether or not the account-holder has dishonestly concealed his liability to tax. Incontrovertibly, the HSBC material has been stolen and represents criminally obtained property in HMRC’s hands. It is, therefore, open to a taxpayer to argue that a prosecution should be stayed for abuse of process or alternatively the documents should not be admitted into evidence because they have been unlawfully obtained.
It is unclear whether Mr Falciani tried to sell the stolen information, but whatever the position Mr Falciani has been indicted by the Swiss federal government for violating the country’s bank secrecy laws and for industrial espionage. His extradition is presently being sought by the Swiss government. Then there is the issue of delay. The information came into HMRC’s hands more than five years ago. Also, following the torrent of publicity directed at HSBC’s role and Baron Green of Hurstpierpoint’s conduct in particular, a question arises as to whether a taxpayer can get a fair trial.
One criminal prosecution has been brought based on Mr Falciani’s documents. The case involved Mr Michael Shanley, a property developer whose fortune was estimated at £132m. In July 2012, Mr Shanley pleaded guilty at Wood Green Crown Court to evading £430,000 of inheritance tax and he was fined £469,444 in fines and costs. He had voluntarily paid £387,000 to HMRC before the prosecution was brought. Apart from a small number of news items, the case attracted little attention. What did HMRC gain from bringing this deterrent prosecution? I suggest the answer is none. When Opportunity Knocks, HMRC has been right not to open the box but to take the money.
