CRIMINAL JUSTICE and TAXATION Ii

i CRIMINAL JUSTICE AND TAXATION ii OXFORD MONOGRAPHS ON CRIMINAL LAW AND JUSTICE Series Editor: Andrew Ashworth CBE QC, Emeritus Vinerian Professor of English Law, All Souls College, Oxford This series aims to cover all aspects of criminal law and procedure including criminal evidence. The scope of this series is wide, encompassing both practical and theoretical works. OTHER TITLES IN THIS SERIES In Search of Criminal Punishment and Freedom Responsibility Alan Brudner Ideas, Interests, and Institutions Nicola Lacey Prosecuting Domestic Violence A Philosophical Analysis Character in the Criminal Trial Michelle Madden Dempsey Mike Redmayne Abuse of Process and Judicial Stays Preventive Justice of Criminal Proceedings Andrew Ashworth and Andrew L.- T. Choo Lucia Zedner A Philosophy of Evidence Law Homicide and the Politics Justice in the Search for Truth of Law Reform Hock Lai Ho Jeremy Horder The Criminal Justice System The Insecurity State and Healthcare Vulnerable Autonomy and the Right Edited by Charles A. Erin and to Security in the Criminal Law Suzanne Ost Peter Ramsay Rethinking Imprisonment Manifest Madness Richard Lippke Mental Incapacity in the Criminal Law Killing in Self- Defence Arlie Loughnan Fiona Leverick The Ethics of Plea Bargaining Richard L. Lippke iii Criminal Justice and Taxation PETER ALLDRIDGE Drapers’ Professor of Law, Queen Mary University of London 1 iv 1 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © P. Alldridge 2017 The moral rights of the author have been asserted First Edition published in 2017 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2017930522 ISBN 978– 0– 19– 875583– 8 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work. v For Ann, Frederick, and Helen vi vii General Editor’s Introduction This monograph challenges some key assumptions held by criminal lawyers about the actual boundaries and the proper boundaries of the criminal law. Should the criminal law be used to penalize those who fail to comply with the taxation regime? That simple question dissolves into more detailed and more complex questions—whether there should be criminal offences of non- compliance and, if so, which wrongs should be criminalized; and whether those offences should be used as the stock response to the targeted non- compliers, or whether the criminal law should be deployed as the last resort after various civil and other mechanisms. Peter Alldridge approaches these issues through rigorous analysis of the distinction between tax avoidance and tax evasion, through a sustained critique of the chaotic state of the relevant English criminal law (common law and legislation), and through a searching assessment of the machinery of prosecution. He demonstrates the importance of studying procedure, raising questions about the special powers available to those investigating tax non-compliance in relation to such issues as search, the privilege against self-incrimination, and legal professional privilege. Thus the core issues on which this monograph shines its scholarly light are not only questions of criminal law and of criminal procedure, but questions about the interaction of the two at a practical level and at a normative level. Andrew Ashworth viii ix Preface and Acknowledgements This is a study of the group of criminal offences of tax evasion. Only a small proportion of instances of these crimes that come to the attention of the authorities are prosecuted. The book considers tax evasion against the back- ground of growing concerns, arising from the financial crisis of 2007–8, about financial crime. These concerns have generated demands for more, more vig- orous, and more punitive responses, amplified by the publicity around HSBC Suisse and the Panama Papers. Expressions of outrage in the debates around the election of 2015 and the EU referendum in 2016 regarding the posi- tions of large international companies and rich individuals renew recognition of the difficulties, risks, and expenses of bringing prosecutions in this area and raise considerations as to whether the traditional criminal procedure and punishment is the best way in which to deal with financial crime. Tax evasion law and practice have never been simple, but four further con- nected developments have made them more complex. First, the insertion into the traditionally understood distinction between evasion and avoidance of an intermediate notion of ‘aggressive avoidance’ has given rise to pressure for a realignment of categories. Second, the increasingly important international dimension arising from the abrogation of the ‘Revenue Rule’ has thrown attention into some murky corners, including those identified in the scandals. Third, the changing role of the professions has generated scrutiny of the pos- sibility of imposing criminal liability upon them, and also of the boundaries of privilege. Fourth, the growth of the anti- money laundering industry, and its move into tax evasion, have meant that tax offences have moved to the forefront of the assault upon the proceeds of crime, if only because this is the only area in which the sums of money involved might come close to those whose recovery was first promised by the industry. The prosecution structures have altered over years. The history is of differ- ent treatment, until recently, of crimes falling under the respective jurisdic- tions of Customs and Excise and the Inland Revenue, and of the assimilation of the two branches one to another in this century. The many changes reflect tensions in the relationship between investigation and prosecution functions and as to how the lines of accountability work, consistently, with a practically operable structure. Most disappointingly, some of them have been driven by priorities elsewhere, with operative factors only of marginal significance to the prosecution of tax evasion. x x Preface and Acknowledgements Collection of material stopped on 1 June 2016, and although it has been possible to insert some later references at proof stage to what will be the Criminal Finances Act 2017, its final form was not known. The text was submitted after the EU referendum, but before even the earliest legal conse- quences were known. In any event, efforts to deal with evasion on an international basis will continue, and their success will depend more upon the levels of commitment of the main players than the forum in which their collaboration occurs. In the production of the text I have incurred numerous debts. Amongst colleagues, Richard Walters and Bob Ferguson read and made very helpful comments on drafts. Librarians at the Institute of Advanced Legal Studies went well beyond what one might reasonably expect, and, when approached, HMRC fielded enquiries very well. Ann Mumford first piqued my interest in the subject, read the text, and has given tremendous support throughout. Errors and omissions that remain are my own responsibility. London, 30 June 2016 xi Table of Contents Table of Cases xv Table of Statutes xxv Table of Statutory Instruments xxvii Table of EU Legislation xxix Table of International Instruments xxxi List of Abbreviations xxxiii 1 Introduction 1 2 Crimes of Evasion— History and Theory 7 A Short History 7 Customs and Excise 8 Customs 8 Excise 9 Smuggling to Evade Duty 11 The Relationship between Customs and Excise Duties and Other Taxes 14 Precursors of Income Tax 14 Income Tax 15 What Is Wrong with Tax Evasion? 17 The Nature of the Wrong 18 Conscientious Refusers and Tax Resisters 20 Advisers and Customers 21 Complicity of Corporations 24 3 Avoidance and Evasion 25 Avoidance 26 The Jurisprudence of Tax Avoidance and Statutory Interpretation 28 Avoidance— Remedies 31 Evasion— Remedies 34 Blurring the Line between Avoidance and Evasion 34 TheHSBC Suisse (2015) and Mossack Fonseca (Panama Papers) (2016) Scandals 37 4 Criminal Evasion of Duties and Taxes 41 Types and Interrelationships of Criminal Offences 41 Common Law and Statutory Offences 41 xii xii Table of Contents Specific or General Offences? 43 Vague or Precise Definitions? 45 Tax- specific or Not? Mutually Exclusive or Overlapping Offences? 46 The Existing Criminal Charges

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