Cayman key target in UK tax evasion investigation

British tax authorities have said that they are cooperating with their American and Australian counterparts in revealing a large cache of information about the use of complex offshore structures to conceal assets by individuals and companies. 

The 400 gigabytes of data, believed to have been in the possession of the UK tax authority for three years, still have to be fully analysed, according to a news release issued last week by Her Majesty’s Revenue and Customs agency. But preliminary analysis of the information being shared with the US Internal Revenue Service and the Australian Taxation Office show the use of companies and trusts, particularly in Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands. 

The information will be shared with other tax administrations as part of the global fight against tax evasion, British authorities said.  

Jennie Granger, HMRC commissioner and director general for enforcement and compliance, said working with the international tax community to pursue offshore evasion is another important step in closing the net on tax evasion. 

“There is nothing illegal about an international structure, especially in a globally integrated economy and these arrangements may be perfectly legitimate and may already have been declared to HMRC,” she said. “However, they may involve tax evasion, avoidance or other serious offences by taxpayers. What has to stop is using offshore structures to illegally hide assets and income.” 

So far, Revenue and Customs has identified more than 100 people who benefit from these structures and some are already under investigation for offshore tax evasion.  

Tax authorities have further identified 200 UK accountants, lawyers and other professional consultants who advised on setting up the offshore structures. The HMRC indicated these services providers will also be scritinised.  

HMRC called on UK residents who use these offshore structures to review their taxation arrangements, and seek advice if necessary, to ensure they are compliant with UK tax law. The HMRC also said it encourages voluntary compliance and early disclosure of tax irregularities, warning that failure to do so may result in a criminal prosecution or significant financial penalties and the possibility of their identity being published.  


Turning up the heat 

George Osborne, the UK chancellor of the exchequer, said: “The message is simple: if you evade tax, we’re coming after you.” 

Mr. Osborne noted the international cooperation is reflective of British Prime Minister David Cameron’s “key priority to increase transparency and clamp down on tax avoidance and evasion” ahead of the UK’s presidency of the G8 this year. 

Dax Basdeo, chief officer in the Cayman Islands Ministry of Finance, speaking at the Offshore Alert conference in Miami last week, said to understand what is driving the UK agenda is to understand what is going on in the EU.  

“Certainly in the last few months the EU has come forward with documents and statements suggesting what it intends to do in terms of tax fraud and tax evasion,” he said in reference to the meeting of EU finance ministers in Dublin on 13 April.  

It is understood that behind the scenes the UK has intensified the pressure on its overseas territories and Crown dependencies to adopt new measures to fight tax evasion, such as the automatic exchange of tax information.  

At the time, Mr. Osbourne said the UK overseas territories “are in no doubt about what we expect of them”. 

In addition, Austria, in defence of its own banking secrecy laws, publicly criticised the UK for its overseas territories and Crown dependencies, Mr. Basdeo said. 

In May, the Cayman Islands and other overseas territories and Crown dependencies joined an EU pilot programme for the automatic exchange of tax information.  

The agreement, based on the US Foreign Account Tax Compliance Act, will force financial institutions in the participating countries to reveal financial details of foreign clients and pass them on to the relevant tax authorities to be checked for evasion.  

German Finance Minister Wolfgang Schäuble emphasised that the initiative of initially six major EU countries is not limited to returns on interest, such as governed by the European savings tax directive. It will also be applied to all forms of capital income by companies.  

The initiative is a template for a wider multilateral agreement and, as such, open to all EU member countries. 

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