The cautionary tale of the 79-year-old tax dodger

How much of George Osborne's pledge to cut tax evasion is chest-thumping?

UK chancellor George Osborne has unveiled a budget full of detail on government plans to crack down on tax evasion. The UK government has been banging its drum for some time on the topic, but now it’s released some firm detail on what it intends to do, and in particular its offshore strategy. The question is how much of this is chest-thumping and what will it actually mean?

Here, like in many other areas, it’s useful to see what the US is doing and it’s clear that the UK has taken its lead from across the Pond. The US has had significant success putting the fear into US citizens with assets abroad. The US Internal Revenue Service has netted more than $5bn in back taxes, interest and penalties since 2009. This included the conviction of a 79-year-old former offshore account holder, Mary Estelle Curran, who was fined $21m having failed to report tax of $667,716 on her undeclared offshore accounts (although the accounts did hold $41m so she wasn’t left destitute by the fine!). The HMRC has outlined plans to use similar name and shame tactics to get the desired result.

The message the government and HMRC are trying to send is clear: the government is doing its worst to be a big bad monster and force tax-dodgers to quake in their boots and fess up. The government says it will ‘name and shame’ not only avoiders, but those who help them all – or as David Cameron referred to them in Davos earlier this year: “the travelling caravan of lawyers, accountants and financial gurus”. The aim is to bring in an extra £4.6bn in taxes over the next five years and the tax exchange agreements recently agreed with Jersey, Guernsey and the Isle of Man are expected to bring in more than £1bn of that over the same period.

This seems like a modest amount, and it would be entirely realistic to see this figure edge higher. According to global wealth consultancy WealthInsight the amount of offshore funds held in the UK and Channel Islands by local clients’ stands at about £515bn. Osborne’s figure of £1bn is, therefore, a tiny drop in this ocean of offshore money.

However it’s important to remember that this kind of rhetoric about tax dodgers is not new. Governments have been talking about it for the past seven years, although it’s only now that the regulatory machinery has caught up. There’s little doubt the smart money has already moved to become transparent – those caught in the coming years are likely to be those without Cameron’s ‘caravan’ of sophisticated advisers.

Still it’s important not to underestimate to what lengths the tax authorities will go to claw back revenue. Since 2010 the HMRC has spent £1bn on tax gathering including employing an extra 2,500 staff by 2014-15. And the HMRC is not just targeting high flyers; it recently released a list of evaders who had avoided £25,000 or more. The writing is on the wall. The government coffers need any penny they can scrape together and the HMRC is set to go to what may seem like extreme lengths to claw back all it can get from its taxpayers, at home and abroad.

George Osborne. Photograph: Getty Images
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Theresa May knows she's talking nonsense - here's why she's doing it

The Prime Minister's argument increases the sense that this is a time to "lend" - in her words - the Tories your vote.

Good morning.  Angela Merkel and Theresa May are more similar politicians than people think, and that holds true for Brexit too. The German Chancellor gave a speech yesterday, and the message: Brexit means Brexit.

Of course, the emphasis is slightly different. When May says it, it's about reassuring the Brexit elite in SW1 that she isn't going to backslide, and anxious Remainers and soft Brexiteers in the country that it will work out okay in the end.

When Merkel says it, she's setting out what the EU wants and the reality of third country status outside the European Union.  She's also, as with May, tilting to her own party and public opinion in Germany, which thinks that the UK was an awkward partner in the EU and is being even more awkward in the manner of its leaving.

It's a measure of how poor the debate both during the referendum and its aftermath is that Merkel's bland statement of reality - "A third-party state - and that's what Britain will be - can't and won't be able to have the same rights, let alone a better position than a member of the European Union" - feels newsworthy.

In the short term, all this helps Theresa May. Her response - delivered to a carefully-selected audience of Leeds factory workers, the better to avoid awkward questions - that the EU is "ganging up" on Britain is ludicrous if you think about it. A bloc of nations acting in their own interest against their smaller partners - colour me surprised!

But in terms of what May wants out of this election - a massive majority that gives her carte blanche to implement her agenda and puts Labour out of contention for at least a decade - it's a great message. It increases the sense that this is a time to "lend" - in May's words - the Tories your vote. You may be unhappy about the referendum result, you may usually vote Labour - but on this occasion, what's needed is a one-off Tory vote to make Brexit a success.

May's message is silly if you pay any attention to how the EU works or indeed to the internal politics of the EU27. That doesn't mean it won't be effective.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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