18 Apr 2016

Andrew Smith comments on the proposed corporate offence of failing to prevent the facilitation of tax evasion in the FT, Economia, New Law Journal and Law Society Gazette

UK and foreign companies would be criminally liable for failing to prevent their staff facilitating tax evasion, under government proposals.

New details of plans announced by David Cameron last week emerged on Sunday as the government said it was changing the rules and working culture that let companies deliberately turn a blind eye to wrongdoing.

The “professional enablers” provisions in the Serious Crime Act 2015 already criminalise the facilitation of tax evasion, while the 2002 Proceeds of Crime Act did the same to all dealings with the proceeds of evasion.

But the proposed legislation — which was initiated before the furore over the Panama Papers — criminalises the “failure to prevent” the facilitation of evasion for the first time and puts obligations on corporates to monitor their employees, agents and subsidiaries.

The planned offence will cover both UK and overseas tax evasion.

Andrew Smith, a partner at Corker Binning, a law firm, said it was “difficult not to feel a sense of unreality” when looking at the provisions relating to the facilitation of foreign tax evasion. He questioned the practicality of a measure that could turn any trial into “an abstruse debate about foreign law”.

He said: “In the vast majority of cases, where the authorities of a foreign country have suffered a tax loss, the most pragmatic — and arguably the more just — solution is to place the culpable suspects on trial in that foreign country and if they are in the UK, to extradite them to the foreign country.”

But he welcomed the decision to introduce a defence for companies in cases where it was “not reasonable” to expect them to have any prevention procedures in place. This seemed to recognise that smaller companies should not be burdened with creating compliance measures if the risks of tax evasion were perceived to be non-existent.

Read the full article in the FT here.

Andrew’s comments have also been published in articles in The Law Society Gazette, STEP, New Law Journal and Economia.