UK Gov: companies to be liable if employees ‘facilitate’ evasion

UK prime minister David Cameron’s government is pushing ahead with plans to boost enforcement of anti-tax evasion in the UK, with the publication of draft legislation aimed at making UK and foreign companies criminally liable for failing to prevent their staff from helping in the “facilitation of tax evasion”.

The draft legislation  “for the new corporate criminal offence of failure to prevent the criminal facilitation of tax evasion” was published on Sunday in the form of a 59-page consultation document.  The closing date for comments is 10 July.

Although the timing of the publication of the proposed new regulations coincides with a post “Panama Papers” mood in the UK and globally to crack down on tax evasion, in fact, the consultation document says in its introduction that it “considers draft legislation and guidance” that had first been outlined in an HM Revenue & Customs response document “of 9 December 2015”, which in turn had followed on from an earlier consultation that ran from July to October 2015, in the wake of a March 2015 announcement of plans to introduce the “new criminal offence”.

The Panama Papers, of course, were  some 11,500 documents that were said to have originated in the Panama offices of a globally-active law firm that were “leaked” to, and made public by,  a US-based investigative journalism organisation earlier this month.

The Panama Papers leak may have prompted Cameron to announce last week that the proposed tax evasion facilitation legislation would become law this year.

Outlining the thinking behind the new legislation, the Government explains, in an introduction to the consultation documents, that the current environment “does not foster corporate monitoring and self-reporting of criminal activity”, and that in fact, the law as it currently stands actually “renders corporations that refrain from implementing good corporate governance and strong reporting procedures hard to prosecute, and offers no incentive to invest in such procedures”.

The Government said it was particularly interested in receiving “real life examples” from stakeholders, noting that its previous round of consultation had resulted in a number of stakeholders offering “real life examples of how the offence would impact their organisation and its interactions with their existing obligations”, which it had found “particularly helpful”.

It also noted that feedback received to date had suggested that “stakeholders would find it clearer if the elements of the offence relating to a UK tax fraud and those relating to an overseas tax fraud were separated into separate offences, though both rely on a number of the same definitions”.

“The Government has therefore prepared alternative draft legislation with this change to allow stakeholders to consider and comment on which form of drafting offers the greater clarity.”

The proposed legislation will add to an existing body of law that is aimed at discouraging the evasion of UK tax. Currently, there are already provisions in the Serious Crime Act 2015 which criminalise the facilitation of tax evasion. An earlier piece of legislation, the Proceeds of Crime Act, dealt with the proceeds of such evasion.

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