NOT ON GEORGE’S RADAR...

Across the other side of the pond tax evasion remains an important issue, on this side of the pond you get the impression that the Conservative part of the Con Dem Westminster government just hopes it will quietly go away. As a direct result of the US government’s pursuit if tax evaders Switzerland's oldest bank is to close permanently after pleading guilty in a New York court to helping US citizens evade paying their taxes. The Swiss bank, Wegelin (established in 1741) will pay $57.8 million dollars (£36 million pounds or 44 million euros) in fines to US authorities.

Once the fine has been paid then Wegelin will cease to operate as a bank. The bank had accepted that it had allowed more than 100 American citizens to hide something close to $1.2 billion dollars from the Internal Revenue Service for nearly 10 years. Wegelin, based in the small Swiss town of St Gallen, was started 35 years prior to the US declaration of independence. It is the first foreign bank to plead guilty to tax evasion charges in the USA. In recent year other Swiss banks have taken steps to prevent US citizens from opening offshore accounts to avoid paying tax.

US President Obama was 100% right to suggest that the governments of the world should jointly tackle the issue of tax evasion and tax havens. The problem is that successive Westminster Governments are involved in tax evasion and indirectly support tax evaders, as a significant proportion of tax evasive activities revolve around the UK Crown Dependent territories. By tackling the tax havens, the tax avoidance and the questionable dealings of the derivative traders, hedge funds and the off balance sheet trading then we might go so way towards dealing with the consequences of the worldwide financial crash.

I am shocked to discover that there is tax evasion here?

However, I suspect that nice Mr Cameron and the other 18 millionaires in the cabinet will do nothing to close the tax loopholes – so much for all of us being in it together? Perhaps it's just that we are ordinary taxpaying citizens just expect too much from government.

As the UK Government continues to be heavily involved in aiding and abetting tax evasion worldwide via British Overseas territories (including the Cayman Islands) and will actively fight in Europe to prevent open and transparent accountability and regulation for the City of London but won't chase up tax evaders.

Expecting the Tories or the party formerly known as New Labour to seriously tackle tax evasion is perhaps a little naive as they are part of the problem. The Lib Dems might deliver on electoral reform or any of the three Westminster parities to have an honest debate about Party funding before tax evasion is dealt with. Westminster helps to hide some £ 1.6 trillion pounds from various nations’ tax authorities, and some of the city banks are hand in wallet with drug dealers, dictators and terrorists when it comes to money laundering. Hmmm...Over to you then George...

THE CONTENTS OF GEORGE’S IN-TRAY?

Tax evasion! Surely not!

One way or another, tax evasion and tax avoidance is rarely out of the headlines especially as many heavily indebted governments are increasingly keen to hunt down every tax dollar / euro or pound that is owed. Considering that the Conservative elements of the Con Dem coalition government continues to looks slightly uneasy whenever tax avoidance and tax evasion comes up I cannot help wondering whether or not the National Audit Office report on tax evasion will make it out of George Osborne’s in tray.

A National Audit Office report has revealed that of HM Revenue and Customs (HMRC) is struggling to curb aggressive tax avoidance schemes is costing the UK billions of pounds in lost tax.  HMRC is faced with a backlog of 41,000 cases with potentially up to £10.2 billion pounds worth of evaded tax at stake. The National Audit Office (NAO) said tackling tax avoidance was difficult but HMRC had to do better. In the last two years HMRC has successfully challenged 40 tax avoidance schemes.

The NAO revealed that between 2004 and 2011 some 2,300 avoidance schemes were disclosed to the tax authorities, but as around 100 new schemes have emerge every each year. It has been estimated that there are potentially some 30,000 users of what are known as employment intermediary schemes and partnership loss schemes - where partnerships that make record a loss to shelter their other income from tax. The loss is artificially inflated via "circular loans" (or deferred expenditure) which are never actually incurred to exceed the amount actually invested in the partnership.

HMRC has tried to tackle the practice with enforcement action in a few “lead" cases, but investigations can take years to resolve and any rulings cannot always be applied successfully elsewhere.  Despite this since April 2010, HMRC has been started 110 avoidance cases and despite being successful in the vast majority of cases where judgements have been reached the NAO suggested that there was no evidence that litigation was proving an effective deterrent to tax evasion and avoidance.

Tax evasion is only part of the problem, as Tax Research UK estimated that the Exchequer loses out to the tune of £64 billion pounds per year through shadow economic activity, which is 16 times larger than the estimated £ 4 billion pounds that the UK Government misses out on due to tax evasion. That works out at roughly about £1 pound out of every £8 in the economy.

Despite this the Con Dem Government continues to pursue a reckless slash and burn (cut) approach to the public sector. They have reduced the number of staff in Revenue and Customs from around 100,000 to 65,000 and there are further plans to reduce the numbers to around 50,000 by 2015.

To expect the Tories or New Labour for that matter to seriously tackle tax evasion is perhaps a little naive as they are part of the problem. It would be a bit like expecting the Lib Dems to deliver on electoral reform or any of the three Westminster parities to have an honest debate about Party funding.

Perhaps the ordinary tax paying citizens just expect too much, I mean the UK Government continues to be heavily involved in aiding and abetting tax evasion worldwide via British Overseas territories (including the Cayman Islands). They help to hide some £ 1.6 trillion pounds from various nations’ tax authorities, and some of the city banks remain hand in glove with drug dealers, dictators and terrorists when it comes to money laundering. So clearly we are not all in it together.

SUMMER RECESS READING?

The Treasury Minister David Gauke has said it is "morally wrong" to pay tradesmen such as plumbers, builders and cleaners in cash in the hope of avoiding tax. He says that the practice came at "a big cost" to the Treasury and meant other people had to pay more to help balance the books. The Westminster government has highlighted this in its desire to clamp down on tax avoidance. The minister’s pronouncement may indicate a desire by the Westminster government to hit out on those who can least affords to tax evade.

On a similar theme, a report written by James Henry, a former chief economist at the consultancy McKinsey, for the Tax Justice Network, ‘The Price of Offshore Revisited’ makes interesting reading. The report estimates that the global super-rich elite had the best part of some $ 21 trillion dollars (or £ 13 trillion pounds) stashed away in secret tax havens by the end of 2010. The figure is equivalent to the size of the US and Japanese economies combined. Why do I somehow suspect that this interesting document will probably not be on George Osborne, David Cameron or David Gauke’s summer recess reading list.

SIMPLE CRIMINALITY

For most people a crime is a crime and if you got caught you tended to do the time or take the punishment. If the vast majority of us fiddled our expenses, we would be prosecuted, lose our jobs and perhaps (depending on the scale of the fiddle) go to prison. Likewise helping yourself to a bottle of water after a riot can get you 30 days in prison, yet misselling members of the public around £ 3.9 billion pounds worth of PPI results in no real punishment for the people responsible.

Bob Diamond’s partial use of the Nuremberg defence, whereby there was no real problem with fiddling the Libour rate, because he had told someone in the Treasury what was going on, may not work in court because merely informing a superior of criminal acts committed or about to be committed is no excuse for committing the criminal act. The banks aside for a moment, if most of us don’t pay our council or road tax we get prosecuted (and our cars get crushed into the bargain) yet tax evasion largely goes unpunished.

Tax evasion may be costing the UK exchequer some £64 billion pounds a year, the equivalent of £1,000 pound per person within the UK. The shadow economy also hits the exchequer hard and indirectly affects every one of us in the wallet. Non declared income, tax loopholes, simple avoidance or off the books economic activity within the shadow economy adds up to tax free economic activity to the tune of £ 160 billion pounds a year. This is around 10.5% of the UK’s GDP, and is ironically somewhat large than the UK’s deficit which sits at around 8.3% of the UK’s GDP.

Tax Research UK, estimates that this shadow economic activity means that the Exchequer loses out to the tune of £64 billion pounds per year, this is some 16 times larger than the £ 4 billion pounds that the UK Government estimates its misses out on due to tax evasion. That is roughly about £1 pound out of every £8 in the economy. Yet the Con Dem Government in its ideologically driven reckless slash and cut approach to the public sector has reduced the number of staff in Revenue and Customs from around 100,000 to 65,000 and plans to reduce the numbers to around 50,000 by 2015 – talk about a no brainer!

Mind to expect the Tories to seriously tackle tax evasion, is a bit like expecting New Labour to stand up to the Trade Unions or both of them to have an honest debate about Party funding. The UK Government is heavily involved in aiding and abetting tax evasion worldwide, British Overseas territories, including the Cayman Islands, help to hide some £ 1.6 trillion pounds from the different nation’s tax authorities. So it should be little wonder that some of the city banks are hand in glove with drug dealers, dictators and terrorists when it comes to money laundering.

SOMETHING WE WILL NEVER SEE...

President Obama

The USA and England may not just be divided by a common language and the Atlantic Ocean, there is the issue of tax evasion and tax avoidance. Last week President Obama, during his State of the Union Address to a joint session of the US House of Representatives and the US Senate, briefly lambasted those who sought to pay as little taxation as possible.

The gist of his comments ran along the lines of everyone needed to pay their fair share of tax, otherwise the American dream was broken, and that hard work was no longer rewarded and that unnamed others should be required to play by the rules and do their bit too – and pay their fair share of taxation, the same as everyone else does.

That is about as close the an American President can get to having ago at tax evaders and even then he may get accused of playing the ‘class war' card. Tax or its apparent avoidance briefly became a big issue in the US Republican primaries as Newt Gingrich effectively forced Mitt Romney to publicise his tax returns, which revealed the fact that he made $20m (£13m) last year in unearned income.

Newt Gingrich's supporters then funded a series of adverts labelling Mr Romney a "vulture" and "corporate raider", and accusing him of making his millions by asset-stripping and firing workers. He openly mocked Mr Romney's bank accounts in Switzerland and the Cayman Islands.

Prime Minister David Cameron

Mitt Romney then duly gave as good as he got and laid into Newt Gingrich by focusing much of his attack on Gingrich’s political and personal integrity and he attacked the way he has made money, and accused him of being a lobbyist.

So tax, tax evasion and tax avoidance in times of austerity may well be a big issue in the forthcoming US Presidential election amongst other things. After all we are all supposed to be in this together. David Cameron used to make much of saying we were all in it together, but, that no longer seems to be, nor ever was the case.

This is something that David Cameron will no doubt go out of his way to do his best to avoid making any reference to this issue now or any-time soon. Some of us (its now pretty apparent) are in it a great deal less than most of us.

I mean, its awfully awkward, having gone out to bat in Europe for the square mile and conveniently forgetting the UK’s other 5,999 square miles. I think for most of us, despite the increasingly desperate Tory spin, it is now pretty clear where David Cameron stands (or squirms) in his position, it would make dinner with Lord Ashcroft awfully embarrassing.

ON NO! NOT AGAIN?

Baroness Dean of Thornton-le-Fylde, a member of the Lords committee that vetted Lord Ashcroft for his peerage ten years ago has now admitted that she had been shocked and surprised to hear two weeks ago that he was still not a full UK taxpayer. While giving testimony to a Commons select committee, the Baroness said she had assumed that Lord Ashcroft had fulfilled his undertaking to become a "permanent resident" of the UK - oddly enough it appears that William Hague thought the same thing.

The Times (March 18th) reported that the man himself - Lord Ashcroft and William Hague, the former Tory leader (who had an uneasy 20 minutes on BBC Radio 4's Today Programme) and who pushed the honour through, had both been invited to appear before the Commons Public Administration Committee in its special hearing on "propriety and peerages". The Times discreetly noted that both men refused to attend because they considered the Committee to be partisan.

Oddly enough the Committee's three Tory members also boycotted the hearing — giving its Labour MPs a clear run at their target. From David ('Call me Dave') Cameron's position the sooner this ends the better, but, I suspect that there is much more to come before a discreet veil is drawn over this sorry business.