The UK tax authority HMRC is offering a tax amnesty to UK residents featured in 2021’s Pandora Papers disclosures, the revelations produced by the International Consortium of Investigative Journalists (ICIJ).
At the time, the huge leak of 11.9 million documents revealed the offshore accounts of 35 world leaders, including current and former presidents, prime ministers, heads of state, and more than 100 billionaires, celebrities, and business leaders.
The letters HMRC is sending out are described as “nudge letters,” intended to incentivize those who may have underreported their tax position, offering them a chance to make a full declaration within 30 days of receipt.
Those who do not fully cooperate or fail to come forward face 200 percent penalties and potential jail time: it’s a heady incentive to come clean.
I believe HMRC’s approach is sensible, given the circumstances. But let’s be clear: investigating UK national tax evaders using offshore companies and trusts to a criminal standard will be a resource-heavy undertaking and likely take many years. Given this reality, seeing how many “tax dodgers” come clean in response to this approach will be interesting.
Given the complex nature of multi-jurisdictional criminal investigations, it is likely that some will take their chances and see if they can ride out the impending storm.
My only concern is that HMRC must be certain that it targets (criminal) tax evaders, as opposed to (legal) tax avoiders. Those who are merely tax efficient in their affairs should not needlessly be roped in with those intent on criminally evading their obligations.
Politically, the terms “tax evasion” and “tax avoidance” are often deliberately conflated by campaigners and politicians, knowing that many will likely fail to appreciate the difference. This deliberate broad-brush approach, accompanied by the use of terms such as “fat cats,” serves no purpose other than to alienate the general public, who are inevitably brainwashed into believing that successful businesspeople are using offshore services for nefarious motives.
It is a pity that some politicians and campaigners appear determined to portray offshore companies negatively. The media embraces this perspective as it sells copy and guarantees clicks.
Indeed, there seems nothing finer than a “scandal” whereby a footballer or star of the screen is “outed” for owning assets via an offshore structure, despite this being a legal undertaking and often advised for tax-efficient purposes. Unfortunately, by taking a sensationalist approach, we are stoking the politics of envy and division simply to garner attention.
There is too much negativity surrounding offshore services, even though they have many lawful and legitimate functions. If they have been abused by the powerful and corrupt, then that should be exposed; but that is also no reason to relentlessly portray them as vehicles whose sole use is tax evasion and money laundering.