Tag Archives: HMRC

The End of Tax Evasion

The days of tax evasion are over. As for avoiding taxes, avoidance is simply evasion that the government hasn’t yet turned into evasion and made illegal. The moment Swiss banks and the like decided to computerize their accounts the game was up for tax evasion. There is no such thing as a secure computerized database; eventually they all leak like sieves. Sooner or later somebody will pass the financial details of tax evaders on to the authorities – possibly even the bank itself will be the informant should they be placed under enough political or commercial pressure. After the disclosures of Heinrich Kieber and Hervé Falciani, the world of tax evasion will never be the same again.

Kieber worked in the IT department of the Liechtenstein Global Trust (LGT) bank in Vaduz, the capital of the Principality, between 2000 and 2002. Someone in the bank had the bright idea of computerizing all the bank’s records – they imagined their clients being impressed by the efficiency with which their records were managed. Kieber was part of the team undertaking the task, but while employed there he surreptitiously downloaded the financial details of clients onto four DVDs. In 2006 he was paid nearly 5 million Euros by the German tax authorities for a list of German clients of the bank. As an extra bonus he was also given a new identity. Subsequently Kieber was paid a further £100,000 by the UK tax authorities for a list of 300 British clients. Kieber also spilled the beans on LGT’s operations on behalf of American clients to the US Senate Permanent Subcommittee on Investigations, where he described in detail the bank’s procedures for obfuscating the provenance of assets. A transcript of his evidence is even available online.

Then there was Hervé Falciani, who is in the news today. He was arrested by Geneva police late in 2008 for data theft. When he was working as a software engineer at HSBC’s private bank in Switzerland, Falciani downloaded details on 24,000 clients. He skipped the country, and then passed the details on to the French authorities, and consequently they recovered nearly 500 million Euros in unpaid taxes. The French also forwarded information to their counterparts in the UK and elsewhere. Only now has the information hit the UK news. HMRC has been quietly pinning down the UK tax evaders in Falciani’s lists, and are instigating civil actions so as to maximise the tax take from the evaders.

The authorities have won the battle, but will they win the war? With the end of tax evasion, and tightening of avoidance rules, it means that high net worth individuals (HNWIs) are faced with a difficult choice: stay and watch their fortunes progressively stripped away, or take flight to jurisdictions that recognize and welcome the enormous positive impact that these people provide for national economies.

In The Flight of the Golden Geese (the e-book will be out soon) we take a long hard objective look at the rationale of the taxation habits of governments, and lay out what HNWIs can do to ensure that what is theirs, remains theirs.