My comments in last week’s Accountancy Age bear further discussion (FSA plea in hunt for attackers’ funds, page 4, 27 September). The National Criminal Intelligence Service has stated that where reports are submitted to the Inland Revenue disclosing fraudulent evasion of tax liabilities, copies should simultaneously be sent by the reporting professional to NCIS. NCIS maintains that such a procedure is appropriate and is covered by the Criminal Justice Act 1993. The CJA certainly embraces all forms of fiscal crime including tax evasion.
My views are these:
– In the wake of the atrocities committed in New York, some human rights issues will generally – and understandably – be put on one side as the governments conducting or assisting in the war against terrorists seek to trace their assets and flow of funds.
– It is conceivable that in rare situations reports into tax evasion could contain information that may be useful in that context. For example, names of the taxpayer’s business associates that may have some significance to an intelligence service, but none to the reporting professional.
– There are a number of dangers however, in suggesting an automatic simultaneous release of an intended confidential report into tax matters to NCIS. Two such dangers are these:
(a) A risk of double jeopardy to the taxpayer who has transgressed.
It is possible, based upon R v W and Another that not only will a tax settlement be made with the Inland Revenue in respect of evaded tax, but that later the taxpayer may face a prosecution instigated by NCIS and perhaps based upon Companies Acts and related tax offences. Even if it is established that the taxpayer is innocent of any association with terrorists and/or their activity and NCIS has received a tax fraud report that it has to study, is it not likely that NCIS will want to justify the time spent upon the matter by ensuring a prosecution? If so, where would be the justice in that situation?
(b) If errant taxpayers perceive that there is a potential risk of double jeopardy, then they are surely going to be reluctant to disclose the relevant facts of their evasion to the revenue departments. Further, they will not be candid with their own advisers in the accountancy or legal professions.
Professionals advise potential clients of the possible risks associated with making disclosures in traditional fashion to the revenue departments; clearly such advice may need revision and extension.
– The fact is that inspectors of taxes from the Revenue’s special compliance office have for sometime now been working alongside NCIS officers. This is another complication and not conducive, given the interpretation NCIS is placing upon CJA 1993, to encouraging disclosures of tax irregularities by taxpayers to the Revenue.
– The likely result from NCIS’ apparent current views is a decline in recovered evaded tax if those needing to disclose tax irregularities feel encouraged not to do so because of NCIS’ attitude.
– It may be helpful if NCIS would publicly state what it intends to do with reports made to the revenue authorities disclosing tax frauds where it is clear that there is no connection between the taxpayer and terrorist activity or with those suspected of it.
John Gwyer, PKF
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