Combatting Offshore Tax Evasion After Brexit EmilDuvessa SondajBandeen, Han Juliette Bowen, Mark O’Brien, Will Melling and Zeki Dolen Emil Sondaj Hansen,
The Public Accounts Committee’s conclusion from December 2013 provides a balanced summary of the current system:
“The tax gap is a theoretical concept to assess tax revenues lost to the Exchequer. It does not cover the full amount lost through tax avoidance. It sets out to measure the difference between the amount collected and the amount that should be collected. The stated tax gap underestimates the amount of money lost to the Exchequer … HMRC should be explicit about the limitations of its current measure of the tax gap and gather intelligence about the value of tax lost through aggressive tax avoidance schemes.”18
HMRC’s estimate seems to place a lower bound on the annual cost of offshore tax evasion and avoidance at around 1% of total tax liabilities. However, as noted, this estimate does not account for wider costs to output and society (for example, from criminal activity financed by funds in offshore accounts hidden from relevant authorities). Moreover, even if the annual cost of tax evasion and avoidance to the government coffers is comparatively small, the accumulated losses over many years will be considerable. Finally, it is important to also note the significant cost to developing countries whose tax-base is being eroded as corruptly acquired money is laundered into secrecy havens19 Tax evasion and avoidance hence create significant costs both to government and society at large, making an appropriate strategy to combat the issue- domestically and internationally- imperative.
I.II BREXIT AND TAX EVASION Brexit marks a particularly crucial juncture in British politics for considering new strategies on tax evasion. Brexit has caused a political schism throughout Britain. This, coupled with the 18
Seely (n 1) p. 19.
19
Nicolas Shaxson, Treasure islands: tax havens and the men who stole the world. Bodley Head, London.2011
The Wilberforce Society Cambridge, UK
www.thewilberforcesociety.co.uk
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February 2021
