The origin of the leak The HSBC files were obtained through an international
collaboration of news outlets, including the Guardian, Le Monde, BBC Panorama
and the International Consortium of Investigative Journalists
1 In late 2007, Hervé Falciani, an IT expert at HSBC's Swiss bank, hacked into
its customer files. He fled to France with police on his trail for breaching
Switzerland's rigid bank secrecy laws.
2 The French authorities detained him, but refused to extradite him when they
realised the data could identify thousands of French tax evaders. Falciani now
lives in France under protection.
3 In early 2010, under finance minister Christine Lagarde, France prepared
confidential lists of the leaked names for other countries. The so-called
"Lagarde list" led to scandal and arrests in Greece, Spain, the US, Belgium and
Argentina.
4 Britain's tax authority, HMRC, received a list in 2010 from which it identified
more than 1,000 tax evaders. More than £135m ($206m) was quietly recovered in
repayments, but only one person was prosecuted. There has been no UK legal action
against HSBC. Names were never revealed.
Why so few prosecuted in Britain? Wouldn't this be a good opportunity to get some assholes who thought they could shift the tax burden to others? Six month prison sentences sounds reasonable. British prisons suck, but given that this is partly the dodgers fault that's just poetic.
> Wouldn't this be a good opportunity to get some assholes
It would, if there was an actual will to "get some assholes" in the first place.
As reported by Private Eye several years ago, as soon as the current government got into power, several outstanding (and huge) tax-dodging cases were quietly settled, largely in favour of such dodgers. Once called on it, they reshuffled a couple of appointees and said it wouldn't happen again. I wouldn't be surprised to find the new bosses were told to put this list in the wrong drawer and accidentally forget about it entirely.
The previous government would have probably used the list for a fundraising round - if you can sell peerages, you might as well sell pardons. The next government will likely replace a few appointees here and there, and if pressed they will claim cases are too old to be efficiently investigated, it was all the previous guys' fault, etc etc.
As I recall, to get prosecuted for tax evasion in the UK, you need to not only commit the tax evasion, but also to lie to the HMRC investigation of the tax evasion, at the point where they ask you to sign a form that explicitly says that if you lie now and they find out, they will put you in jail.
So unless you lie at that point, you will not be prosecuted, only investigated.
This may let some tax dodgers off the hook, but it also ensures that genuine mistakes are not punished by jail time.
Is that really true?! If so it seems that a winning strategy is to actively try to dodge the system but be prepared to pay it back when you know you'll get found out. That makes no sense.
Why would that same rule not apply to other crime?
No, it is not a winning strategy as dogers have to pay a lot more due to punitive interest rates than those who correctly declared their taxes from the beginning.
Furthermore, the same rule also applies to other crimes. The rule is called "innocent until proven guilty".
It's not really "innocent until proven guilty" though. You're guilty the whole time, it's just that you get off the hook if you never formally lie to HMRC. From what I understood of the original comment it's more like, innocent until you're formally challenged on it, decide to lie and are subsequently found out. That's literally a get out of jail free card.
Murder someone, don't admit it, found out -> charged
Murder someone, admit it -> charged
Dodge tax, lie about it, found out -> charged
Dodge tax, don't lie about it, found out -> not charged!
Do you know what the punitive interest rates are in these cases?
HMRC say that [0]:
"Those who try to get an unfair advantage will have to pay:
- any tax that is due
- any interest that is due
- any penalties that are due"
I can't find any information about the the penalties that have been handed out in real terms. There's potentially more to be gained by holding on to the cash and using to your advantage until you get found out (if you ever do).
Maybe it's a reasonable way for HMRC to do things but it's a bit weird that you can knowingly be in the wrong without having the risk of jail time hanging over you.
Arguably, the penalties aren't really punitive enough, otherwise we wouldn't still have an industry of bleeding-edge tax dodges. I know -- professionally and not closely -- one guy who specializes in complex tax mitigation for the ultra-rich. His more outre schemes may get shut down by the IRS but, if you're a client of his, you're essentially gambling tens of millions of dollars that you can avoid paying hundreds of millions in top-level taxes. At the wealth level they're at, it's a perfectly reasonable roll of the dice.
Protecting people from their own mistakes is fine, but they lost that defence once they put the money in secret swiss bank accounts. Secret. Swiss. Bank. Accounts. Might as well accidentally ask the local mafia to white wash some money while they twirl their mustaches.
The problem is that there's nothing illegal about putting your money in secret swiss bank accounts per se.
It first becomes tax evasion (in the UK anyway; details may vary) the moment you fail to report income or capital gains that are taxable, since the UK does not tax wealth.
This is true, but in many cases people are trying to avoid tax by placing money in a secret account. It's not like regular banks in the UK throw information out to the newspapers as a matter of course, but they would respond to requests from the tax authorities or from a court in the case of a commercial or divorce dispute. Many people with Swiss bank accounts have them not so much because they wish to live in Switzerland but because of the secrecy, ie they wish to conceal things from people who would otherwise legitimately have access.
Now this is not true in all cases, of course. People who lead international lifestyles often find a Swiss account useful because everyone has heard of Swiss banks, and their association with international transfers long predates the SWIFT system. So it makes sense people King Abdullah of Jordan (who has zero tax liability as a monarch, but who is heavily engaged in diplomacy and power-brokerage), or the late Helmut Newton, a famous fashion photographer (who never had very much in his Swiss bank account - a few tens of thousands - but who worked all over the world).
So I don't think that having a Swiss bank account is dispositive of anything by itself, but at the same time it would be disingenuous to ignore the fact that they have often been used to obscure taxable income.
Yeah, but you don't accidentally both place your money in secret Swiss bank accounts and fail to report it. You may want a secret account for privacy and you may forget to report all your money. Doing both at once, however, is highly unlikely. There's an end to plausible deniability and beyond that end should lie prison time.
It may be unlikely, but not so unlikely that I think you'd manage to convince many to put someone in prison for it without additional evidence.
Expect lengthy trials with all kinds of details showing up that creates sufficient doubt to make it hard to justify a prison sentence.
For starters, unless HMRC can prove that you have received the money in a way that should be taxed in the UK, they have no reason to expect you to report the money, and so most people don't.
E.g. for my part I'm Norwegian, but have been ordinarily resident in the UK for the last 13 years or so. The first year I lived here, I was not ordinarily resident for tax purposes, and maintained accounts in Norway that HMRC had no expectation of knowing anything about, and no legal basis for me to report.
But if I had had a large enough fortune and income, it'd have been trivial for me to maintain a status as not ordinarily resident much longer, and legally avoid reporting any income due from work done outside the UK at that point. The same is possible for UK citizens who move out of the UK to work for some time. For me there was no point, since all my income came from the UK, and so I brought my money into the UK once I'd tidied up my Norwegian affairs.
If you wish to defraud the HMRC, then, and create plausible deniability, you move out of the UK, or at least spend enough time outside the UK for a few years to be able to claim that when you receive that X million payment from WeAreTaxEvaders Ltd. in the Cayman Islands, directly to your secret account in Switzerland, it is income due to you entirely from work done outside the UK in a period where you were not resident in the UK for income tax purposes. Then you move back, and conveniently don't tell the HMRC because, you will claim, it has nothing at all to do with them (of course it is not at all because you don't want to risk that they take a closer look at the paper trails related to WeAreTaxEvaders Ltd. and maybe find traces of payments from the UK etc., or a timeline that doesn't match when you were abroad), and you way have had legitimate reasons to want to e.g. invest in Swiss shares or whatever at a later date when you retire to a cabin in the Swiss alps. Or whatever. If you are telling the truth about this, it is none of the HMRC's business that the money is sitting there unreported.
This is the problem with going after these schemes: There are any number of completely legal - for good reason, often, - mechanisms that allow the unscrupulous to create sufficient plausible deniability that actually proving a case becomes incredibly hard. It's easy to sit and assume that of course these are tax evaders. Except some non-trivial percentage of them are not.
HMRC risks not only not getting the actual tax evaders imprisoned, but not getting their hands on the money either, if they go to court on insufficient evidence. Going after just the money is a lot easier since people are often willing to pay to make the threat of further investigation go away even if they see the risk of prison as remote.
Once you get into dealing with large amounts of money across the world, there's a lot of things that seem like they should be illegal that aren't.
While this case is probably rather clear-cut, most cases are not. The Government doesn't actually want to put people in jail (what problem would that solve?), unlike the US Government - it just wants its money. The law seems reasonable to get that.
Most out of the system? In what way could this possibly be true? 100 billion is 1/6th of UK government expenditure in a year. Moreover that money was generated by these people not money creamed off the UK taxpayers. Simple arithmetic tells us that the people who get the most out of the system are the ordinary UK citizens who use government services .
In the way that the existence of various government-maintained infrastructures (that is, "the system") is what permitted them to acquire wealth in the first place.
>Or to send a warning? Would that really be effective?
Yes. A lot of tax evaders who wouldn't even blink at a potential $500k fine would not take any risks if the were faced with real jail time. That means more tax revenue.
Seems like this is the same dataset which Falciani leaked to the french authorities 5 years ago: http://en.wikipedia.org/wiki/Herv%C3%A9_Falciani
Edit: See also http://en.wikipedia.org/wiki/Lagarde_list - this list has already a quite interesting history.