31/03/2012 743 Comments
We have seen a few old faces and themes emerge overnight in the light of the surprisingly excellent Channel 4 exposé on Rangers. Annoyingly, an old myth has been repeated by some posters: “tax evasion is illegal, tax avoidance is legal”. Another one is that Rangers have not been accused of tax evasion- ergo they have not done anything illegal. This is absolute rubbish on both counts.
This is the sort of ill informed mythology that gets repeated by the idiots who told us Craig Whyte was buying Rangers for £33m. It is a bit like the story about Eskimos having lots of words for snow: just because a piece of untrue nonsense is repeated often does not change its central essence. It is still untrue nonsense.
So by way of a bit of a filler post while we are waiting on events to further unfold, we shall do a bit of revision for those who might have missed this first time around. The laws covering tax evasion and tax avoidance are identical. The only real difference is that in cases of tax evasion, such overwhelming evidence will exist that HMRC believes it can prove that the people involved planned to commit fraud. The perpetrators must also have known that what they were doing was criminal when they did it. (Our lawyers friends will provide a more precise definition, but this will be good enough for most purposes). This is a pretty difficult standard to achieve. In fact, it is so difficult to prove, criminal prosecutions for tax evasion are normally reserved for accountants and lawyers- people whose knowledge of tax law is easier to demonstrate. This explains why several high profile tax fraud cases, such as the recent one involving the canine pet of a football manager, ended in acquittals despite evidence that looked pretty impressive to the general public. In Scotland, this high hurdle is elevated further by the requirement for corroboration.
Tax avoidance can be illegal. It is a term used to describe tax schemes that simply will not be pursued in a criminal court. Some avoidance schemes are illegal, while others have been deemed to be legal if implemented correctly. HMRC even have a tax avoidance scheme registration plan (DOTAS). Tax payers can use DOTAS registered avoidance schemes and be sure that they will not be accused of criminality. Those who are deemed to have breached tax law through an illegal avoidance scheme are pursued through a civil process i.e. a tax tribunal- rather than a criminal court. This is where Rangers are. They are not accused of any criminal action at this point (and it is unlikely that they will), but they have been accused by HMRC of pursuing illegal tax avoidance practices. This resulted in them being sent tax assessments for underpayment, interest, and penalties. Rangers have appealed this determination by HMRC and the First Tier Tribunal (Tax) will decide whether to uphold Rangers’ appeal or not. The First Tier Tribunal will effectively rule on whether Rangers’ tax practices were legal or illegal.
You might wonder why criminal charges would not be pressed if someone was found to have shredded key documents in a tax investigation. Surely this would be criminal? Well, mibbees aye, mibbees naw.
It could be deemed criminal if you could prove that the person who requested the shredding was knowingly destroying a document to subvert an investigation by a government body. Proving this degree of intent will often be impossible. So, tax collectors will settle for collecting taxes- through the civil courts. In the tax tribunal process, interest payments and penalties are used to ensure that tax avoiders (that is ones deemed to have broken the law) do not gain an advantage by paying a smaller amount later. In cases, where there is the possibility of criminal behaviour by ‘minor cogs’ in the machine rather than the ‘big gear’, there would also be a reluctance to prosecute.
Is Channel 4’s report of document shredding relevant to Rangers’ tax cases? I do not know. That would be for Rangers FC and its former directors to comment.
There must be some kind of remedial teaching award available to anyone who is able to explain any of this to a Scottish sports journalist.