Responding to tax evasion – The selective use of the criminal justice system

Bourton, Sam

Abstract

Historically, very few prosecutions were brought for tax offences in the United Kingdom, with the tax authority preferring to seek the civil resolution of tax liabilities. From 1998-2002, the Inland Revenue only prosecuted 263 defendants for serious tax fraud in the entire four year period. By 2007, only two in a thousand cases of detected tax evasion were prosecuted in the UK. However, following the financial crisis and several high-profile tax evasion scandals, Her Majesty’s Revenue and Customs (HMRC) were tasked with increasing the number of prosecutions for tax evasion offences, from 165 individuals in 2010/11 to 1165 individuals in 2014/15, by making sufficient referrals to the Crown Prosecution Service. Consequently, the number of prosecutions for tax evasion offences dramatically increased, from 420 in 2010/11, to 1288 in 2014/15. Despite these significant changes, a comprehensive evaluation of HMRC’s Criminal Investigation Policy has not been carried out for over twenty years. This is concerning, for the introduction of prosecutorial targets led HMRC to ‘focus on less complex cases’, particularly ‘lower-value cases’, with prosecutions being undertaken for losses as small as £250. The average prison sentence also fell by 57% from 2011-2014, suggesting that HMRC were focusing on low hanging fruit to fulfil their objectives. Of particular concern, considering the context in which such targets were introduced, is that only thirteen individuals were prosecuted for offshore tax evasion from 2009-2016. Accordingly, this paper provides an evaluation of HMRC’s response to tax evasion, identifying the challenges involved in selectively using the criminal justice system. Ultimately, this paper argues that the practical impact of HMRC’s Criminal Investigation Policy renders it questionable whether individuals are being treated equally, or whether only the egregious behaviour of those with lower incomes is being addressed using the criminal justice system, contrary to the Rule of Law.

Citation

Bourton, S. (2021, October). Responding to tax evasion – The selective use of the criminal justice system. Presented at Financial Crime: Challenges and Responses, 2021, Centre for Financial Law, Regulation & Compliance, IALS, London

• Presentation Conference Type: Speech
• Conference Name: Financial Crime: Challenges and Responses, 2021
• Conference Location: Centre for Financial Law, Regulation & Compliance, IALS, London
• Start Date: Oct 14, 2021
• End Date: Oct 15, 2021
• Deposit Date: May 4, 2023
• Publicly Available Date: May 4, 2023
• Keywords: Tax evasion; Tax; criminal justice system; tax law
• Public URL: https://uwe-repository.worktribe.com/output/10734670