HMRC and its overseas counterparts have never had and shared so much information about overseas arrangements from sources other than the ICIJ. HMRC has access to far more information outside of the public domain than journalists sometimes assume – whether that be from automatic information exchange arrangements like the Common Reporting Standard, directly from dialogue with taxpayers, from privileged access to overseas beneficial ownership registries or from co-working with its overseas counterparts.
Short of public appeals in the tax courts or criminal trials, most offshore tax investigations into tax evasion, tax avoidance or simple error are conducted and settled as civil matters completely outside the public domain. This prevents any public grandstanding leading to deadlock but is mindful of the potential embarrassment of public proceedings for the taxpayer/the risk of an embarrassing loss or unhelpful legal precedent for HMRC if private agreement cannot be reached, as well as the potential escalation of legal costs for both sides. Privacy is actually very important here in serving the public interest.
Where offshore leaks involving stolen information and potential taxpayer criminality are concerned, private civil proceedings also avoid potential arguments in criminal courts about the admissibility of stolen data for the purposes of a criminal prosecution – while still having the fallback for HMRC that were a civil dispute to come before a civil tax tribunal, that is, because it could not be resolved privately, a tax tribunal could be expected to allow “discovery assessments” of tax relying on such information to stand since for these purposes once a “discovery” is made it cannot be unmade regardless where the information might come from.
We begin this decade with the Pandora Papers; an ICIJ exposé of around 12m leaked documents from the 14 different offshore service providers said to be involved. So far, at least where the UK is concerned, journalists seem to be making much of beneficial ownership information and are making the private business dealings of wealthy people public without immediately pointing to obvious wrongdoing.
That is not to say that HMRC will not find the Pandora Papers information it has inevitably acquired from the ICIJ useful. However, where traditional HMRC investigation work is concerned, the utility may largely be limited to helping better inform existing investigations into complex tax avoidance arrangements or to helping HMRC identify potential targets for investigation – the sort of resource intensive investigations that HMRC can only do in limited numbers and which might lead to the payment of further tax, but typically do not involve criminality. Such matters are normally settled one way or another between HMRC and a taxpayer’s advisers on the respective strength of their technical legal arguments.