HSBC and HMRC: what can we learn from Ireland

Last week, the Chairman of the Irish tax authority wrote to its Public Accounts Committee. You can read the letter here.

For students of HMRC’s handling of the Falciani HSBC disclosures, the letter makes for illuminating reading. The similarities between Ireland’s tax system and our own invite comparisons between how the Irish tax authority handled the disclosures – and how we did.

There seem to me to be five potentially interesting points of comparison.

1. Yield. I have written elsewhere about the comparisons to be drawn between us and our continental neighbours on tax yield from HSBC accounts. UK received information on about 6,000 individuals and businesses and recovered tax and penalties of £135m. France and Spain – both with fewer billionaires than the UK – have recovered £188m from 3,000 and £220m from 3,000 respectively.

It is fair to point out that there is no direct read-across from the yield figures for France and Spain as neither has a non-dom rule. It is probably fair to say, as a generality, that money held by UK residents abroad is less likely to give rise to a UK tax liability than money held by Spanish residents a Spanish one. Ireland has a non-dom rule – but sadly the letter does not give a comparable yield figure.

2. Criminal prosecutions. There were 88 individuals with Irish addresses. 20 were considered for criminal prosecution (23%), four were selected for prosecution, three were convicted (3.4%) and 1 remains under investigation. In the UK, there were 3,600 individuals of whom 3,200 were traced, 150 were considered for criminal prosecution (4.2% or 4.7%) and 1 conviction (so far) has been obtained (0.03%).

So the Irish have been spectacularly more successful than us in achieving criminal prosecutions.

3. Does the French Defence stand up? The absence of criminal prosecutions has been blamed by HMRC and the Treasury Minister on constraints imposed by the French on the use to which we could put the Falciani disclosures. Initially both were rather tight-lipped on what those constraints were. However, we know now that the information was disclosed under the terms of the UK France Double Tax Convention Article 27 of which limits its use to tax matters (including tax evasion offences). However, the information was also disclosed to the Irish under the terms of their Double Tax Convention with France (and the EC Mutual Assistance Directive) which contain the very same limitations. It hasn’t stopped the Irish obtaining convictions.

So this evidence suggests we were not justified in blaming the French.

4. What effect did the Falciani disclosures have on the use of amnesties? The point of an amnesty is to encourage people you might not otherwise find out about to come forward voluntarily and put their tax affairs in order. Why would you offer an amnesty to those you already knew about?

I have written here about our misuse of amnesties. But, in fact, the situation is even worse than I then appreciated.

Lin Homer said this to the Public Accounts Committee:

I think that, on previous occasions, we have told you that we thought that there were possibly about 15 or so that we hoped to get through to criminal prosecution. As I have told you on a previous occasion, a number of those moved into the disclosure facility and took themselves out of prosecution that way. A number were discussed with the CPS, and, in the end, of the three that we and they felt most likely to be able to prosecute, they felt that only one had reached the test. That is the top tier.

Quite why those actively being investigated with a view to criminal prosecution should have been permitted to ‘take themselves out of prosecution’ through use of the amnesty I do not know. Certainly this was appreciated by the Chair of the Irish tax authority who said:

The commencement of a Revenue investigation means that the taxpayer is precluded from availing of a qualifying voluntary disclosure.

5. Different approaches to transparency. But to me the most striking thing of all about the letter to the Irish Public Accounts Committee is its tone. The letter demonstrates that the Chairman of the Irish tax authority understands that transparency is important. Our own HMRC, I am afraid, does not. In its dealings with the Press, Parliamentarians, and the public at large it routinely seeks to deflect scrutiny and to discourage accountability.

There is not a day when we, the public, do not read stories of legal avoidance and criminal evasion by powerful corporates and wealthy individuals. Those who have suffered in consequence of the squeeze in public finances are entitled to ask of HMRC, are you policing the line? HMRC’s disinclination fairly to answer that question is highly corrosive of public faith not just in HMRC itself but in democracy and society at large.

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