HMRC has pledged to “relentlessly pursue tax evaders” following the Panama Papers leak, but some experts have cast their doubts over whether the already stretched government department will be able to make any convictions.
The taxman already has experience dealing with leaked documents involving tax evasion, most notably its involvement with the HSBC Suisse affair, which resultes in just a solitary conviction, and has promised to bring anyone who has evaded UK tax via Mossack Fonseca to justice.
“HMRC can confirm that we have already received a great deal of information on offshore companies, including in Panama, from a wide range of sources, which is currently the subject of intensive investigation,” said a HMRC spokesperson yesterday.
“We will closely examine this data and will act on it swiftly and appropriately, where we suspect that UK tax has been evaded.”
Fiona Fernie, head of tax investigations at international law firm Pinsent Masons believes HMRC will act quickly to investigate those who have been named in the data.
“The revenue now has a good amount of experience dealing with data leaks, and is likely to respond quickly and efficiently. As with the HSBC Geneva data leak, anyone named in the list with UK tax affairs is likely to receive a letter and face follow-up investigation.
“Panama is a popular location for this kind of structure – especially for those who are internationally mobile, and those who spend a lot of time in the Americas. There is likely to be a wealth of data for the Revenue to look at,” added Fernie.
There are some however, who believe that HMRC will struggle to act upon the huge amount of information it will have received.
“We know that even before the Panama leaks, HMRC was unable to follow up on many of the hundreds of millions of tax evasion cases in the Channel Islands. That has to raise profound concerns about whether HMRC will be able to cope with the enormous workload likely to be thrust upon it by the biggest tax data leak in history,” said Jolyon Maugham, QC at Devereux Chambers to Accountancy Age.
Spare a thought for our already fatally overstretched HMRC. About to hit by a tsunami of data they don't have the capacity to deal with.
— Jo Maugham QC (@JolyonMaugham) April 4, 2016
Tax experts have also highlighted that the Fonseca leak could give thousands of fraud victims a chance to retrieve money which was fraudulently taken from them.
“The vast leak of information from Panama brings with it a huge opportunity to clawback money for those who were previously used and abused by financial fraudsters,” said Steven Philippsohn, senior partner at fraud litigation firm PCB and Home Office panel member, advising on strategies to counter fraud.
“This leak gives us more than ever before. It is possible to investigate fraud and recover funds from something as small as one email from a nervous bank manager hidden within the papers. While it will take some time to analyse, obtaining this information will open up possibilities for thousands of fraud victims to get money back.”
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The average cost of fraud increased 35.4% to £3.9m in 2016, compared to 2015 data