The claim

factFiction47 Tax evasion: the cracks in the latest crackdown“The number of cases prosecuted is going to go up, and we are talking about a five-fold ramping up over a four-year period.”
Keir Starmer, 22 January 2013

The background

Britain’s top prosecutor, Keir Starmer, turned his sights on tax dodgers in a keynote speech on Monday night.

Speaking at the headquarters of the Crown Prosecution Service (CPS), the director of public prosecutions announced a crackdown on what he described as “dishonest tax avoidance schemes”.

Mr Starmer said: “Tax evasion is not a victimless crime. It is not a ‘fiddle’ in some sort of legal grey area. It is ordinary fraud involving dishonesty and greed. And we all pay for it.”

He also said the CPS would seek to prosecute five times as many tax dodgers.

An impressive claim. Time for a FactCheck.

The analysis

Her Majesty’s Revenue & Customs (HMRC) investigates tax evasion, and many cases are settled in civil litigation.

But, no doubt under pressure from a public increasingly losing its patience with tax-dodging, the taxman is keen to prosecute some of the worst offenders as criminals, and it’s Mr Starmer’s army of CPS lawyers who bring the cases to court.

This promise of a fivefold increase in prosecutions is actually nothing new. The target was first set out in April last year, when HMRC said in its latest business plan that “by 2014-15 we will have… increased the number of criminal prosecutions fivefold”.

A laudable aim, but it begs the question of what kinds of total numbers we are talking about (an increase from two to 10 cases would still be a fivefold increase) and what the baseline is.

The first problem is that no-one will tell us exactly. Neither the CPS or HMRC would furnish us with a complete set of figures. They’ve given us a few numbers from different years then left us to fill in the blanks.

And the numbers that have been given out contradict each other.

The CPS say they bagged 550 convictions in 2011/12. HMRC told us the figure was 413, while figures released by the Treasury in response to a parliamentary question from Frank Field MP earlier this month put it at just 399.

So that’s three different numbers from three different arms of the state. No explanation of the disparity has been forthcoming as yet, so it’s a little hard to know who to believe.

We get the most information from the Treasury, for what it’s worth. Asked how many individuals the exchequer has prosecuted for tax evasion in the last five years, minister David Gauke released these figures:

taxgraphic1 Tax evasion: the cracks in the latest crackdown

(There can be more convictions than prosecutions in a given year because the length and timing of court cases mean we are not talking about the same people.)

Two things immediately stand out. First, the long-term trend is a downward one. There were more prosecutions and convictions in 2007/08 than last year. If the crackdown has already begun, it hasn’t borne much fruit yet.

And prosecutions in 2009/10, the baseline for the fivefold increase, are unusually low.

HMRC and the CPS also put prosecutions at a low in that year – at 219 and “about 200″ respectively. This suggests that a blip year has been chosen as the point to start tracking that fivefold increase.

If you started the clock ticking in 2011/12, when there were nearly 500 cases, you would only be able to claim a threefold increase if you hit 1,500.

But how robust is that target of 1,500 anyway? We eventually managed to extract from the CPS that these figures do not all relate to tax evasion or “dishonest tax avoidance”, to use Mr Starmer’s phrase.

This is the entire tax prosecution caseload we are talking about, including things like excise duty and tax credits. Fair enough, but not exactly the kind of swindling that Mr Starmer has been talking about today.

Of course, prosecuting more cases overall may well mean that more complex, fraudulent avoidance schemes are prosecuted too, but how many? We don’t know.

Mr Starmer also let slip, while talking to the Financial Times, that this bold new target is not really all it’s cracked up to be.

He told the paper: “The Crown Prosecution Service will dramatically ramp up the number of tax evasion cases it takes on with a view to prosecution…”

Taking on a case with a view to prosecution isn’t the same as actually going to court, so comparing the 200 (or however many) real cases with 1,500 prospective cases is of limited value.

And remember that this target is just for prosecutions, not convictions. There could be a massive increase in cases taken to court, but HMRC could lose all of them.

That is in fact the prediction being made by some tax industry insiders. This blog, on the website of the tax investigation consultancy Gilbert Tax, is typical: “This increase is likely to result in a much lower conviction rate as HMRC do not have the resources to build the evidence needed for a conviction for tax evasion.

“The blurring of the lines between tax evasion (which is illegal) and tax avoidance (which is legal) is also worrying and it is hard to see how a jury will convict someone for tax evasion when they have been assured by a professional advisor that it is tax avoidance.”

The verdict

As we’ve found in the past, government promises of new crackdowns on tax evasion and avoidance often ring as hollow as a gambler’s piggy bank.

To recap: we’re being asked to believe that there will be a fivefold increase in prosecutions for tax evasion by 2014/15.

But that only works if: you use your own secret figures which differ from other departments; you start counting at the lowest possible point; you count every criminal tax case as “tax evasion”; you blur the distinction between actual and potential prosecution, and you play down the fact that more prosecutions doesn’t mean more tax dodgers behind bars.

Another twist is that we have no idea whether there are more or less convictions for tax evasion now, three years after HMRC’s prosecution department was merged with the CPS.

Mr Starmer says the merger has given him more lawyers to take on more cases, but we haven’t been given figures on how many cases were taken on and won in the old days.

All in all, we’re going to file this tax announcement in the same doubtful category we’ve placed so many others.

By Patrick Worrall

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