“To your question, “did I have any occasions of non-compliance in the last six years?” the answer is yes.
“In mitigation – and let me be clear on this – I can assure you that lessons have been learned and I am now a new, reformed organisation.
“David Cameron Offshore Holdings plc”
After the Panama leaks, the Conservative government is desperately trying to portray itself as the scourge of organised tax avoidance. It is consulting on draft legislation which would introduce a new corporate criminal offence of failure to prevent the criminal facilitation of tax evasion. Such promises have become part of impression management, but have rarely delivered.
A good case study of the smoke and mirrors tax avoidance policies is the government’s much trumpeted Guidance on Promoting Tax Compliance and Procurement. These rules came into effect on 1st April 2013 and were meant to ensure that organisations engaged in tax avoidance/evasion are barred from securing public contracts.
Of course, that would upset the government’s wealthy backers and giant corporations. So they were designed to be inadequate. They applied only to central government contracts of above five million pounds. The rules do not apply to local government’s £12 billion procurement or other public bodies. They are only asked to look at the practicality of applying the government’s guidance.
The rules require bidders to self-certify whether during the previous six years they have had any ‘occasions of non-compliance’ i.e. whether they have submitted an incorrect tax return because of their engagement in tax evasion. If so, the bidder is asked to submit an explanatory statement and offer mitigating factors. These could be: ‘we are under new management’, ‘culprits have been fired’, ‘we have learnt lessons and are now a new reformed organisation’, etc.
This self-certification only applies to the company bidding for the contract and not to the entire group of companies. Thus, one subsidiary could be engaged in tax evasion whilst another can bid for the public contracts. None of the documents are publicly available and thus cannot be scrutinised by citizens. The rules do not require the government purchasing departments to verify the claims made by the bidder.
In any case, the chances of a resource starved business friendly HMRC securing a tax evasion conviction against a major corporation are miniscule. HMRC’s staff numbers have been declined from 91,000 in 2005 to about 56,000 in 2015, and further staff cuts are planned.
HMRC’s financial resources have also been cut in real terms, even though investigating tax avoidance is a resource intensive task, especially when the other side can marshal armies of accountants and lawyers. Cases can drag on for a decade or so before being resolved. By its own admission, HMRC claims to have the capacity to investigate only about 35 wealthy tax evaders a year.
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