Danny Alexander, Chief Secretary to the Treasury, announced government plans to expand the scope of corporate liability for economic crime to include failure to prevent tax evasion, as well as facilitating others to evade paying tax. The new offence is likely to have a radical impact, not just on how companies in the financial services and wealth advisory sectors operate, but also on how corporates of all sizes, from SMEs to International conglomerates, structure, implement and monitor their financial statutory compliance.  

A prediction fulfilled

At the end of 2014 in our article on the OECD findings that Senior Management often know that bribes are being paid, we predicted that it was highly likely that the scope of corporate liability for failing to prevent economic crime would expand, and that it would do so in an increasingly high profile context. 

Two months in to 2015, that prediction has come true.  Tax evaders are public enemy number 1 at the moment.  The Treasury Select Committee's inquiry into allegations that HSBC's private banking arm in Switzerland facilitated tax evasion is set to be the immediate catalyst for a reform of the way corporates can be liable in connection with economic crime.  Tax evasion, and economic crime in general, is set to become a key issue in the upcoming general election and it appears that it is one on which the main political parties are broadly in agreement.   

What has been said?

  • April 2014: The Chancellor, George Osborne, spoke at the International Monetary Fund in Washington and said:

"We are changing the balance of the law so the burden of proof falls on those who are hiding their money offshore and we don't have to prove that they intended to do so."

  • 3 December 2014:  The Chancellor delivered his Autumn Statement but there was no reference to the promised changes.  Sources suggest that the delay was caused by the negotiation of the new exchange of information agreement between members of the OECD;
  • 15 February 2015: Shadow Chancellor, Ed Balls, promises that a Labour government would crack down on tax evasion on the Andrew Marr Show; and
  • 22 February 2015: Danny Alexander outlines government plans to create a new offence of failing to prevent tax evasion and facilitating others to evade tax on the Andrew Marr Show.

How might the new offence be implemented?

Plans from all parties are unclear at the moment, with Labour appearing to want to focus on a root-and-branch review of HMRC practice and the current coalition government focusing on the new offence. The likelihood is that nothing will emerge about the practicalities of implementing the new offence until after the May general election.

As we have said before, however, the scope of the section 7 Bribery Act 2010 offence of failing to prevent bribery is so broadly drawn that it would take only minimal amendment to bring all economic crime within its scope.  Whether the present government remains in power in some form or a newly constituted government is formed in May, it will be interesting to see whether our suspicion that the opportunity to expand the scope of section 7 of the Bribery Act 2010 will prove to be the way that these new offences are enacted is proven correct.

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