The Crackdown On Tax Fraud


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The crackdown on tax fraud and offshore tax evasion remains very much a key issue in 2014. Governments are working to detect and prevent tax evasion, and collect unpaid tax.

The crackdown on tax fraud and offshore tax evasion remains very much a key issue in 2014. Governments are working to detect and prevent tax evasion, and collect unpaid tax. Their investment into new technology and skilled tax investigators is paying dividends.


In the UK, HM Revenue & Customs (HMRC) was tasked with bringing in £18.7 billion of additional revenue from tax compliance over the 2012-13 tax year. According to a report by UHY Hacker Young in December, the tax authority beat this target by £2 billion.

The amount recovered from personal taxation increased by almost 40% from the previous year. Much of this came from looking at taxpayers in the highest tax band.

The additional collection was £11.2 billion in 2007-08, so it is clear the authorities are increasing their efforts to collect unpaid taxes. 

HMRC and HM Treasury started the year by publishing their latest policy on reducing tax evasion and avoidance. 

Over recent years the government has invested £994 million in HMRC to increase tax revenue by £7 billion a year by 2015.

HMRC has launched a number of voluntary disclosure facilities, to encourage people to come clean before they are tracked down. This raised £547 million so far, plus £140 million from follow up activity.

The tax office is taking swifter legal action against those who fail to regularise their tax affairs, allocating more resources to increase the tax evasion cases brought before the criminal and civil courts. It recruited an additional 200 criminal investigators and aim to increase the number of prosecutions from 165 in 2010 to over 1,160 in 2014-15.

HMRC is expanding its Affluent Unit, which looks specifically at the affairs of wealthy individuals. 

Importantly, the UK is working with other tax administrations to prevent offshore tax evasion. It is a key player in multilateral initiatives such as the G8, G20 and OECD, building on the pilot automatic exchange of information scheme announced by the G5 last April, which has since been joined by many other countries, including Portugal. 

The UK Crown Dependencies and Offshore Territories all joined the initiative, agreeing to automatically exchange information about accounts held in their jurisdictions with the UK and others.

A new centre of excellence within HMRC will study how best to use the data received under these new agreements, to identify offshore tax evasion.

The government is investing in advanced technology to identify tax fraud and evasion. So far an investment of £45 million has brought in an extra £1.4 billion of tax revenue. 

Last year, an HMRC publication “No Safe Havens”, set out its strategy for offshore tax evasion for 2013 and beyond. 

It expressed a renewed commitment to clamping down on those who conceal income and gains overseas. The objectives are to ensure:

  • there are no jurisdictions where taxpayers feel safe to hide their income and assets 
  • would-be offshore evaders realise that the balance of risk is against them 
  • offshore evaders voluntarily pay the tax due
  • those who do not come forward are detected and face vigorously enforced sanctions 
  • there will be no place for facilitators of offshore evasion.

The document explains how HMRC is using both bilateral and multilateral agreements to tackle offshore evasion.

The two key elements of bilateral agreements between two countries are automatic exchange of information for the future and measures to encourage those with hidden funds to come forward.

At the same time the UK is promoting a global move to greater multilateral automatic information exchange, sending a strong message to all jurisdictions that it is time to cooperate. 

HMRC has set up a dedicated Offshore Co-Ordination Unit, and there are tough sanctions to counter offshore evasion.

In summary, “No Safe Havens” warns:

The message to offshore evaders is clear: HMRC has the ability to detect hidden income, assets and gains, and the consequences of detection are penalties up to 200 per cent of evaded tax or possible criminal prosecution. Time is running out for offshore tax evaders: there are no safe havens.”


A Spanish government report in October revealed that the measures aimed at combating tax and social security fraud had so far earned the government more than €22.5 billion in tax revenue.  

According to Vice President Soraya Sáenz de Santamaria, €16.5 billion of this was derived from the fight against tax fraud.  

Spain adopted a new anti-tax fraud law in 2012, with the aim of boosting fiscal revenues by fighting tax evasion.   It included the obligation for Spanish residents to declare their overseas assets on Form 720.

According to Sra. Sáenz de Santamaria, last year’s asset reporting enabled the government to identify €87.7 billion of assets. The resulting increase in the tax bases will fundamentally affect tax collection in future.


The Vice President also explained that almost 4,000 interim tax measures had been imposed over just 18 months.  This prevented those under investigation from diverting or hiding goods during the course of their proceedings.  


Spain is a strong proponent of multilateral automatic exchange of information, which is taking off on a global level.  It is also boosting bilateral agreements on the exchange of tax information.  Agreements with the Isle of Man, Jersey, Guernsey and Monaco are in progress.  All this will provide the tax authorities with information on overseas assets and income owned by Spanish residents, enabling them to identify when assets have not been declared.  


The next asset reporting deadline is 31st March, so it is important to establish now what you need to report on Form 720 this year.  You should also review your assets, with specialist assistance, to ensure they are held in the most tax efficient structures for Spain.


Portugal is also looking to increase tax revenue through collecting unpaid taxes and preventing tax evasion.

In January the government announced that its “exceptional and temporary regime” for the regularisation of tax debt yielded a record sum of €1.25 billion for the state.  This easily surpassed the initial target figure of €700 million.

The authorities are investing in new technology and doubling the number of highly qualified tax inspectors.  A special unit, the Tax Compliance Committee, came into force last year to monitor high-income earners and self-employed individuals.  Harsher penalties for tax fraud and evasion are coming into force.  

Tax efficient investment structures are available in Spain, Portugal, France, Cyprus, Malta and the UK which provide attractive tax benefits and are fully compliant with the tax regulations. Seek specialist advice on what is the most effective way to hold your investments, pensions and assets.

13 January 2014

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.