Thursday, August 02, 2007

Offshore Disclosure Facility - Tax 'Hit Squads' unleashed

Todays Comment: Key US growth indicators are showing some clear signs of spillover from the housing recession and the related consumption growth slowdown. The ISM Manufacturing PMI fell by more than expected and the ADP private payroll release points to further moderation in employment growth in July. The recent news releases fit our scenario of a protracted US growth slowdown.


Attack of the two 'T's

More than 50,000 people came forward to take advantage of the 'offshore disclosure facility' in the UK. They now face the problem of ensuring that they pay the right amount of tax, interest and penalty - and no more - by 26 November.

Meanwhile, according to PWC, HMRC determinedly seeks out more offshore bank information and launches investigations into those who didn't come forward by 22 June.

In a recent PWC survey:

89% support the concept of offering a fixed 10% penalty to people who come forward
82% believe that HMRC will gain access to most UK residents' offshore bank accounts
82% would have liked HMRC to have publicised the ODF more widely
73% wanted HMRC to extend the 22 June 2007 deadline

The HMRC are on the war path, there can be no doubt about that. The language that is being used is more appropriate for terror activities than tax issues... "HMRC will vigorously seek out further information:... "HMRC are using an elite team of investigators".."Hit squads will move in after amnesty"...etc

Having discussed this issue some time ago with reference to the European savings directive and its sinister transformation from a passive rule enabling tax collection to an active rule for collecting information on individuals, we still believe that there is something quite wrong with this. We understand the concept behind it, that taxation is being lost through evasion rather than avoidance and the UK government are within their rights to seek out this money. However, the strong arm tactics being employed and the abuse of EU rulings just makes it all seem a little seedy and underhanded to us.

Recently a number of banks have been accused of not protecting the privacy rights of individuals. The absurdly named 'Information Commissioner' Richard Thomas states that "the bosses of these companies must take the security of their customers’ and employees’ personal data more seriously".... Unless, of course, the government want it for their own purposes.

I am in two minds about all this. On the one hand tax is a foreseeable event which means that planning for it can be done in advance. If the taxpayer does not make the effort to plan correctly for the inevitability of tax then as sure as death and errrr.. taxes... he will be found out at some stage. So we should not really have too much against this latest initiative.

The problem that I have is that the issues of privacy are being eroded everyday. With my eye been scanned at US airports, my banking information being collected by 'hit squads' and 'elite teams' it is no wonder that some feel that their very existence is being logged and tagged in some Orwellian conspiracy.

In essence, the incorporation of Article 8 of the European Convention on Human Rights into UK law under the Human Rights Act 1998 creates a general right to respect for privacy where none previously existed. Article 8 offers general protection for a person's private and family life, home and correspondence from arbitrary interference by the State. This clearly has implications for a large number of areas ranging from surveillance to sexual identity. It is important to note that the right to respect for these aspects of privacy under Article 8 is qualified . This means that interferences by the state will be permissible, but only if they satisfy certain conditions. Any interference with the right must be:

• in accordance with the law;

• in pursuit of one of the legitimate objectives spelt out in Article 8(2) ; and

• proportionate - i.e. serve a pressing social need.

So basically if the government decide that they need any information on you, all they have to do is say that it is required for some law or another, taxation being the one we are discussing here.. so our right to privacy under the human rights charter are, pretty much, useless.

What about the Data Protection Act? Same thing, 'If it is part of a legal process...etc.. etc' you basically have no rights. But hold on! If you want to stop cold calls and junk mail you have the full weight of the law behind you.. as my son would say in a deeply sarcastic fashion...'Big Wow'

The information age has opened doors previously unthinkable for commerce, for social networking and for a myriad of situations which benefit our society as a whole. However, I am concerned that the two 'T's - Tax and Terror will be used as excuses to know everything from our finances to our inner most secrets and frailties. Imagine everything about your life was known to one person, or worse one organisation, lets call them a political party.. Could that information be abused to corral you into voting a certain way...or not voting a certain way?

Ridiculous! I hear you say. May I politely remind your about the Offshore Disclosure Facility, the EU 'Savings' Directive and the fact that 50,000 people in the UK just rolled over their personal financial information to the tax man, without being asked....

No comments: