Britain targets financial advisers with new tax-avoidance fines

UK tax return. [Images Money/Flickr]

Britain set out plans on Wednesday (17 August) to punish financial advisers who tell their clients how to avoid paying tax, including hefty fines designed to target what it called the “supply chain of tax avoidance”.

The plans, set out in a document inviting industry feedback, are the first action by Prime Minister Theresa May on a promise made before she took office to clamp down on legal tax avoidance and illegal tax evasion by corporations and wealthy individuals.

“People who peddle tax avoidance schemes deny the country of vital tax revenue and this government is determined to make sure they pay,” Financial Secretary to the Treasury, Jane Ellison said in a statement.

Recouping revenue lost to tax avoidance and evasion has become an important part of efforts to balance Britain’s public finances, as well as a political necessity to respond to voter outrage at perceived injustices in the tax system.

Despite years of trying to clamp down, opposition lawmakers and campaign groups say the government has failed to bring the problem under control.

In a July speech just before she was made prime minister, May named Amazon, Starbucks and Google , all of whom have been criticised over the amount of tax they pay in Britain, saying everyone had a responsibility to pay taxes.

Brussels orders EU countries to claw back 'illegal' tax rulings

Europe’s competition chief ordered the Netherlands to recover €20-30 million in back taxes from Starbucks on Wednesday (21 October) and told Luxembourg to claim the same amount from Fiat Chrysler Automobiles.

Britain’s finance ministry said tax authorities could be able to impose fines on tax planners, advisers and accountants who promote avoidance schemes. Advisers could have to pay a fine of as much as the avoidance scheme helped its users save, the document said.

“These tough new sanctions will make would-be enablers think twice and in turn reduce the number of schemes on the market,” Ellison said.

Earlier this year, May’s predecessor David Cameron responded to the so-called Panama Papers, millions of documents detailing the use of offshore companies for tax evasion, by promising to make it a criminal offence if companies failed to stop employees from instructing clients on ways of evading tax.

The fight against tax evasion is one of the Juncker Commission's main priorities. News of the systematic, state-sanctioned tax evasion practices of many multinationals based in Luxembourg, known as the Luxleaks scandal, broke shortly after the new Commission was sworn in.

On 18 March 2015, the executive presented a package of measures aimed at strengthening tax transparency, notably by introducing a system for the automatic exchange of information on tax rulings between member states.

Every year, the EU loses between €50-70 billion from corporate tax avoidance as companies escape taxation by shifting assets, according to the European Commission.

The so-called Tax Transparency Package will force the EU's 28 member states to share details of any tax deals agreed to with some of the world's biggest multinationals, in information sent automatically every three months. The plan aims to end the secrecy that allowed member states to often compete against each other to attract business and investment.

It does not however question the perfectly legal practice of offering companies tax rulings, the executive said, this being the strict responsibility of member states.

Activists criticised the fact that the tax ruling would remain out of the public eye, remaining privileged information for tax authorities.

EU tax transparency directive 'insufficient first step', activists say

An updated directive on the automatic exchange of information between national tax administrations received the green light by the EU’s 28 finance ministers on Tuesday (8 March).

Subscribe to our newsletters