British savers with undeclared overseas assets, incomes, and accounts are more likely to be prosecuted under new plans revealed by the Treasury as part of the government’s tough stance on tax evasion.
The Treasury revealed last week how its latest plan aims to make tax evasion a criminal offence leading to heavy fines and even jail, as lawmakers aim to deter Britons form hiding their taxable income and assets in undeclared offshore accounts.
The latest plans revealed by Chancellor of the Exchequer, George Osborne, come amidst a global crackdown on International tax havens, and after a similar plan was revealed in Australia by the Australian Taxation Office (ATO).
Describing the proposed legislation as a ‘significant new weapon’ against tax evasion and tax avoidance, Mr. Osborne said, “It is totally unacceptable for people not to pay the tax that is due, and the message will be clear now with this new criminal offence that if you’re evading tax offshore, there is no safe haven and we will find you.”
New rules will make a difference
Currently the HMRC can only secure a conviction if it can prove that an individual was trying to hide money from the authorities, but with the new legislation, the individuals under investigation must prove that they do not have any illegal and undeclared money and assets.
While the HMRC is still calculating the scale of the problems caused by tax evasion and tax avoidance, official figures suggest the total amount lost through non-payment and avoidance was £35 billion in the 2011-12 tax year alone. With the change of rules, the Treasury expects to bring forward £4 billion of tax payments within the next five years.
In addition to making tax evasion a criminal offence, the Treasury is planning to introduce much stricter penalties which may also be extended to include inheritance tax. The new laws will also include financial rewards for whistleblowers who provide significant information about hidden offshore assets.
Transparency in offshore finance
The Treasury has clarified that individuals can appeal in courts against making such payments. A Treasury spokesman said that judges will continue to exercise discretion if they felt that an individual was ignorant of the law. The spokesman also confirmed that the new laws will only apply to income generated from offshore dividends or investment trusts, rather than income earned in Britain and then placed in offshore tax havens.
Mr. Osborne said, “There are no safe havens offshore and those who believe they can get away without paying the right amount of tax have a big shock coming.”
The British government already has automatic tax information pacts with offshore financial centers like the Isle of Man, Jersey, Guernsey, the Caymans, and British Virgin Islands. Britain was also the first nation to sign up to the Foreign Account Tax Compliance Act (FATCA), which has more than 50 nations in a tax information sharing network aiming to make offshore finance transparent and help track down tax offenders.