CIoT welcomes government’s 'joined-up' Panama Papers investigation

THE GOVERNMENT’S plans to tackle the aftermath of the Panama Papers has been met with mixed signals by the CIoT, with the professional body unsure of how it will hold companies account for failing to prevent tax evasion.

This comes just one day after David Cameron announced widespread action to combat UK tax evasion following the Panama Paper document leaks.

Joined-up approach

Cameron is to bring forward plans to introduce a new criminal offence for corporations that fail to take adequate steps to prevent the facilitation of tax evasion.

He also revealed plans to create a new taskforce to investigate the financial affairs of companies mentioned in the Panama Papers.

The taskforce will be jointly led by HMRC and the National Crime Agency and draws on investigators, compliance specialists and analysts from HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority.

International effort

John Cullinane, tax policy director and former president of the CIoT, has labelled the government’s plan to establish a taskforce as “sensible” as there is “a huge amount of data to work through”.

“This is an extremely complex area, with a number of different criminal offences in scope, with different expiry periods and burdens of proof. So it makes sense to bring together specialists…in a dedicated, focused taskforce,” he said.

Cullinane also hopes that the government will take the taskforce plans one step further as the world’s tax authorities also look to clamp down on tax evasion.

“It is important investigations are joined up internationally, too,” said Cullinane.

“The new ‘common reporting standard’ on financial account information exchange, which has been signed by more than 90 countries, should help in this regard. However, while most financial centres have signed up to the new standard, regrettably Panama has not. No doubt the Panamanian government will come under a great deal of pressure on this front in the months ahead.”

‘Challenging offence to draft’

The tax policy director has questioned the government’s intention to proceed with a new corporate criminal offence of failure to prevent the facilitation of evasion, predicting that it will be a “challenging offence to draft”.

“It is very difficult to hold companies to account for actions of individuals.  Clear guidance will need to be provided to help give certainty over how the proposals will work and what organisations must do to ensure compliance. It must be possible for a diligent company to know it is compliant.”