Challenge and controversies face by the HMIC in respect of tax evasion and tax Avoidance

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Challenge and controversies face by the HMIC in respect of tax evasion and tax Avoidance

INTRODUCTION

Background of the study

The last three years have seen a significant increase in the attacks on the tax system by organised criminality. This is currently estimated to cost £5-7 billion a year. Strategies to tackle this have been developed in the indirect tax area (the area of highest risk) and are progressively being extended across the tax system. These have delivered some successes - a reduction in the illegal market for cigarettes by 20% and reducing VAT missing trader fraud by 30%. A strong law enforcement capability is a vital part of tackling this threat and senior management in HMRC are developing a new law enforcement capability in light of challenges and legacy issues. This involves de-merging some 40% of the former HM Customs and Excise investigation and intelligence capacity dealing with serious drugs investigations and transferring it to SOCA and merging the remaining Customs and Inland Revenue function. However, the pressure from fraudsters is relentless and frauds shift and mutate. Information recently provided by HMRC indicates that despite the earlier successes, the losses to VAT missing trader fraud are currently at the same level as they were at the height of the fraud in June 2002. The Department requested an inspection of human source handling - an essential tool in combating criminality.

Problem Statement

There is a desire to re-establish the reputation of HMRC in law enforcement and mobilise behind a strong, strategic direction. HMRC's senior management should take credit for identifying source handling as a topic for early inspection, as this displays a willing and open attitude towards confronting issues that have been cause for concern. The challenge for the Department cannot be underestimated however and will need sustained and robust leadership and direction. HMRC's handling of Covert Human Intelligence Sources (CHIS) appears to be compliant with nationally accepted operating standards in regard to policies and structures. However, when tested in depth, a number of issues were identified around the registration of CHIS and the Department's duty of care towards them. There is also room for improvement in the alignment of CHIS with business needs, and risk assessment associated with them. HumInt is an imaginative initiative to record contact and prevent status drift, but only fully implemented in the enforcement function of the Department.

LITERATURE REVIEW

In the latter part of the First World War, IR adopted a policy of granting immunity from prosecution in return for full co-operation in the majority of its potential fraud cases. This policy was formally publicised in 1923 by written answer to a parliamentary question and became known as the Civil Investigation of Fraud or 'Hansard,' procedure. This policy led to significant differences between the Departments' respective approaches to criminal investigation. HMCE developed a more proactive and aggressive law enforcement capability whilst IR reserved prosecution for only the most 'heinous' and 'exemplary' cases. As a result, there were ...