Monday, December 19, 2011

The U.S. and the U.K. - poles apart on tackling tax abuse

From Douglas H. Shulman, U.S. Commissioner of Internal Revenue, looking at how the I.R.S. has been going after offshore tax abuse:
"Our approach to offshore tax evasion follows a natural course. . .cleaning up the abuses of the past and then mining and leveraging the data we receive to mount a greater attack on the abuse.

Indeed, we have been scouring the vast quantity of data we received from all of our different offshore programs and other sources. This data mining has already proved invaluable in supplementing and corroborating prior leads, as well as developing new leads, involving numerous banks, advisors and promoters from around the world. I can tell you that we now have additional cases and banks in our sights."
The first paragraph kind of says it all. You find some crooks, put pressure on them and, crucially, on their bankers and other intermediaries - then you squeeze out information on others. The net widens. For all the faults of the I.R.S., this general approach marks a stunning contrast to the approach taken by the tax authorities in the U.K. which have instead of pursuing known criminals, have signed cosy sweetheart deals with Switzerland and other tax authorities.

In the U.S. you also have the Foreign Account Tax Compliance Act (FATCA) which is a ferocious and excellent device for rooting out offshore tax evasion, coming in soon. There have been a lot of screams about FATCA, mostly for illegitimate reasons, but some with arguably more reasonable objections that the reporting requirements are extremely complicated, especially for those less able to afford tax advisers to fill in their forms with them. Shulman notes that these concerns are being taken very seriously, and are being addressed.

Then there is corporation tax. The U.S. isn't particularly good at taxing corporations, it has to be admitted. But a damning new report out today from the British parliamentary Public Accounts Committee reveals just how bad the U.K. has been. The first words summarise it:
"This report is a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations. We uncovered both specific and systemic failures which must be addressed."
The release goes on. Just look at this, for instance:
"It is extremely disappointing that senior HMRC officials were not prepared to cooperate with our inquiry in a spirit of openness. We accept that there is a need for confidentiality to protect individual taxpayers, but this must not be used as a cloak to protect the Department from scrutiny.
. . .
It is absurd that we had to rely on the media and the actions of a whistleblower to find out about the details of individual settlements. Parliament and the public have legitimate concerns that large companies are being treated more favourably than ordinary taxpayers, whether they be small businesses or hard-working families."
And this:
"The Department's working practices must be seen by the taxpaying public to be absolutely impartial. The impression being given at the moment is quite the opposite, of far too cosy a relationship between HMRC and large companies."
Indeed - as TJN has been saying for some time, and as outlined in Treasure Islands. And then there is this disgrace, outlined by Richard Brooks in the UK parliament.

This is not to put the U.S. I.R.S. on a pedestal - far from it. But in the U.K., something has gone very, very badly wrong. It's good to see some proper light being shone on this subject at last. Credit to UK Uncut, Richard Brooks and others (including TJN) for bringing this tricky, worthwhile argument to national prominence.


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