Taxman admits there is one law for the rich and one for the poor
THE rich and famous are controversially allowed to escape prosecution for financial crimes by doing secret deals with the taxman, a senior government official has revealed.
Fear of an embarrassing public trial enables HM Revenue & Customs to get ‘very prominent members of the community’ to pay up.
The disclosure by Richard Las, the deputy director of HMRC in charge of organised crime, has provoked an angry reaction from campaigners, who claim it will ‘undermine public faith’ in the tax system.
One critic slammed the approach as giving the rich a ‘get out of jail free card not available to the rest of us’.
Mr Las reportedly told an economic crime conference in Cambridge last week: ‘When deciding whether to deploy our resources, we try to understand what motivates different types of offenders. For example, some tax offenders are very wealthy, prominent members of the community. We know that these types of people do not want the reputational damage of custodial sentences, and we can use that to our advantage.’
The report in The Sunday Times said Mr Las admitted ‘criminal justice’ was never a ‘default option’ for HMRC.
‘We use it where it is necessary and it will have the greatest effect,’ he said.
His comments follow criticism of HMRC for failing to effectively tackle the super-rich who hide money offshore or use aggressive avoidance schemes.
It may also undermine claims by the tax authorities that every effort is now being made to pursue rich offenders who owe tax by a special investigations unit.
Robert Palmer, of Tax Justice UK, a campaign group dedicated to a ‘fair and effective tax system’, criticised the use of such deals. He said: ‘It really undermines trust in the tax system if wealthy individuals are allowed to get away with not paying their taxes and then the tax authorities lets them go.
‘Tax is one of the most basic contributions you can make towards society and it’s really important everyone pays.’
He added that the willingness to strike a deal with celebrities to avoid court ‘speaks of one rule for the wealthy and a different one for everyone else’.
‘It seems like a two-tier system, with some wealthy and more prominent individuals being given a more lenient ride or a get out of jail free card not available to the rest of us,’ he said.
A taskforce was established by HMRC in April 2009 to focus on Britain’s 6,000 wealthiest individuals. But less than two years ago a National Audit Office report revealed there had only been one successful criminal prosecution despite the unit investigating 2,150 people thought to owe around £1.9billion to the Treasury.
In July it was revealed in a Freedom of Information request that HMRC’s specialist investigation department targeting the wealthy has opened 839 investigations into UK taxpayers with assets in offshore tax havens over the past year.
HMRC insists fraud by rich people and corporations is a priority and it is said to be aiming for 100 prosecutions a year until 2020, following extra powers to crack down on tax crime.
The new ‘ strict liability offence’, which comes into effect next month, makes it a criminal offence to fail to declare offshore income of more than £25,000. It means HMRC does not have to prove intent to evade tax – making it much easier to secure a conviction.
It followed the Panama Papers data leak, which exposed how the rich have exploited secretive offshore tax regimes.
But last year the Commons public accounts committee said the Government’s claims to be cracking down on tax avoidance by the richest ‘just don’t stack up’. It found that tax from wealthy people had fallen by £1billion since HMRC set up its dedicated ‘high net worth’ unit to chase funds.
An HMRC spokesman said there have been no admissions of underhand deals, adding: ‘Everyone must pay their fair share of tax, regardless of wealth and status – no one is above the law.’
‘It seems like a two-tier system’