New Fines For UK Tax Cheats
British investors who attempt to hide their money off-shore will have to pay as much as double their original tax bill if they are discovered, Her Majesty’s Revenue & Customs [HMRC] announced yesterday [Jan. 31]
Stiff new British penalties for off-shore tax evasion come into force on April 6 and under the new legislation, fines will be linked to the tax transparency of the country in which the income or gain arises.
All countries are being assigned to one of three categories, with “Category 1” being considered the most transparent in terms of tax exchange information with the UK, while “Category 3” is considered to be the least transparent.
Under the revised legislation, where tax offenses take place in a “Category 1” country, the applicable penalty rate will not be altered. A number of offshore financial centres — including the Cayman Islands, Guernsey and the Isle of Man — appeared on the “white list” of 37 Category 1 jurisdictions which exchange at least some tax information automatically with the UK.
Bermuda is listed in the middle category along with such off-shore business centres as Jersey, Gibraltar and Switzerland. Penalties on illicit activity in Category 2 jurisdictions will be increased 1.5 times and doubled in Category 3 countries.
“The new penalties come on a rising tide of public anger and political indignation in the UK towards the apparent misuse of offshore financial centres by multi-national corporations and high-income earners,” reports one financial website specialising in global taxation policies. “However, some international taxation analysts have come to question the motivation behind the new fines and their potential effectiveness, saying that the HMRC and UK will be poorly served by restricting the use of off-shore financial centres.
“According to a HM Treasury report released in October 2010, in the second quarter of 2009 alone, UK banks received over $332.5 billion of net financing from Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands. The nine jurisdictions single-handedly account for over 60 percent of the total financial flows experienced by the UK banking system.”
