Tax evasion has hit the headlines again with the news that one of the world's most famous footballers, Barcelona's Lionel Messi, has appeared in a Spanish court in connection with allegations of tax fraud.
According to the BBC, Messi and his father are accused of defrauding Spanish authorities of around £3.4 million (around €4.2m). Both men strenuously deny the allegations.
It is yet another example of the more stringent approach that Governments around the world are taking in respect of tax avoidance and tax evasion, in the wake of the financial crisis.
Extent of the problem
According to figures produced by BDO earlier this year, tax fraud is a serious issue for the authorities - it cost the UK £603 million in 2012, roughly double the amount in 2009 (£274m) and 2010 (£309m). In fact the accountancy and business advisory firm estimates that tax fraud accounts for around 44% of all fraudulent activity in the UK.
The scale of the problem is backed up by more recently published figures from the EU Commission. These estimate that non-payment of VAT alone cost the EU a massive €193 billion in 2011 – although the total includes non-collection of VAT as well as VAT evasion.
What action is being taken in the UK?
At national level there has been a spate of prosecutions and convictions for tax evasion, spearheaded by HMRC, but the Government has been taking action too, pushing for the issue to be tackled internationally, and putting forward domestic initiatives.
One of the most recent examples of this is the launch of a new campaign targeting private landlords who fail to pay tax on rental income. According to HMRC, this sector may have failed to pay tax to the tune of up to £500 million in 2009 to 2010 alone.
Separately, the Government is consulting on plans to tighten up rules called compensating adjustments, which it believes are being used by some people to reduce their income tax payments rather than for its proper purpose - to avoid double taxation between individuals and the companies connected to them.
What is happening in Europe?
As we reported earlier in the year, the European Commission has already taken a number of steps to tackle tax evasion. Its most recent action has been in connection with VAT fraud, against which it has suggested a multi-pronged approach:
- a tougher stance against evasion, and stronger enforcement at national level;
- making the VAT system easier for businesses across Europe; and
- reform of national tax systems tot facilitates compliance, deter evasion and avoidance, and improve the efficiency of tax collection.
G20 proposals
Things are moving internationally too. Only this month G20 leaders reached agreement on a series of measures to be taken in order to tackle tax evasion and avoidance around the world.
At their recent meeting in St Petersburg, the G20 leaders called upon the Organisation for Economic Cooperation and Development (OECD) to draw up a new global standard that would enable the automatic exchange of tax information.
They also approved the OECD's action plan on base erosion and profit shifting. This roadmap identifies 15 specific actions that will give governments the domestic and international instruments to prevent corporations from paying little or no taxes.
Speaking after the meeting, Chancellor George Osborne called the agreement “a huge milestone on the road to making the international tax rules fairer.”
Contact Lewis Nedas’ Criminal Lawyers in London
If you have been questioned or contacted by HMRC in connection with alleged VAT irregularities and require specialist legal advice, contact our expert solicitors Jeffrey Lewis or Siobhain Egan on 020 7387 2032 or complete our online enquiry form here.
This blog post is intended as a news item only - no connection between Lewis Nedas and the parties concerned is intended or implied.
