Low tax campaign group urge softer approach for those who fall foul of offshore rules out of ignorance

News - Tax

Written by Ray Clancy

Wednesday, 31 March 2010 08:57

Crackdowns on off shore tax evasions can unfairly punish those who get things wrong out of ignorance and a more tolerant approach would be welcomed, it is claimed.

Ironically it is those on lower incomes who are more likely to fall foul of rules that UK tax officials admit are complicated, according to the Low Incomes Tax Reform Group.

It says it hopes that a more tolerant approach hinted at in last week’s budget will be followed. ‘We have no interest in protecting those who deliberately seek to evade tax by, for example, deliberately concealing funds in offshore accounts in countries which are commonly termed as tax havens. But we are concerned that HMRC proposals to discover and deal with those people do not disproportionately impact on the law abiding majority or result in unfair treatment of people who get things wrong, perhaps out of ignorance,’ said
chairman John Andrews.

‘Whilst acknowledging that overseas tax matters can be complicated, a recent HMRC consultation suggested that anyone getting them wrong should be penalised as if they had deliberately set out to commit tax fraud,’ he added.

The organisation has challenged the proposals in HMRC's consultation document Tackling Offshore Tax Evasion which it claims appears to be suggesting ‘a form of legislative alchemy that would turn the base metal of non-compliance, with its spectrum of circumstances, including careless but not deliberate error, and genuine mistake, into the gold of fraudulent tax evasion, punishable as such’.

It says the HMRC justified their proposals in the consultation document by saying that public awareness of offshore tax issues should now be at an all-time high. ‘In the rarefied corridors of the Treasury they may be aware of HMRC’s recent Liechtenstein disclosure opportunity but we suspect that the man on the Clapham omnibus would not have a clue,’ said Andrews.

LITRG said it welcomed the announcement in the Budget that where a taxpayer fails to comply with a tax obligation in relation to an offshore matter, potential penalties for that failure will be either the same, 1.5 times or double that of an onshore failure depending on the country concerned and that the proposal to treat all non-compliance as akin to fraud has been dropped.

‘This is an improvement on the original proposals and is perhaps not unreasonable in circumstances where tax has been evaded deliberately or deliberately and with concealment. However, we remain concerned that there could be a disproportionate penalty on someone who makes a mistake in relation to an offshore tax matter through ignorance or a lack of care,’ added Andrews.