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Tax Evasion Avoidance

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By Elizabeth Onuoha

Tax evasion, avoidance and compliance

Empirically, the directive to impose tax on organization, businesses and individuals was to secure an environment that continually promotes businesses, economics (micro and macroeconomics) and standard of living within a “state” by reinvesting the taxes received back into the system.

By so doing, ensuring that the socio-economic environment is conducive enough to attract and retain investors thereby promoting sustainable development that will boost continuous growth.

Looking at the global market today with all the scandals prominent in the daily news outbreak, is there really a correlation between the current conduct of tax regulators  as well as  the “state “  and the preceding text as it relates to tax payment?

It is common knowledge that failure to pay or evasion of or resistance to collection of tax is punishable by law, nonetheless, how many tax evaders today have been identified and punished accordingly?

On the 10th of February 2015, BBC Business News published an official statement on the world’s second largest bank – Hong Kong and Shanghai Banking Corporation (HSBC) with $2.7trillion assets, stating that the bank provides a support service for its wealthy client, helping them dodge millions in tax by diverting their major assets to offshore accounts, thus avoiding tax in the countries where their businesses are domicile.

Why is HSBC not being held accountable for this illicit action? Is it ok to hide or not declare funds held in offshore accounts?

In the fiscal year of 2005, a European Union Saving Directive was introduced to deduct tax from offshore Swiss Accounts and pass it to the taxman. This initiative aims to counter cross-border tax evasion by collecting and exchanging information about foreign resident individuals receiving savings income outside their resident state.

Irrespective of the foregoing, HSBC ostensibly stretches its high-end services to assisting its strategic customers evade the laws of taxation- offering them cash-point card that enable them withdraw cash from their undeclared offshore accounts without being charged.

This sort of conduct is unacceptable and disturbing as to what length financial institutions will go in order to retain and/or attract more customers. It is quite appalling that despite the treasury’s claim- Minister David Gauke defended authorities actions on tax avoidance as well as the banks claim to be cooperating with relevant authorities nothing concrete has been communicated to stakeholders and the public in general as regards disciplinary measures.

The list of defaulters was handed over to HM Revenue and Custom which out of seven thousand (7000) British clients recognized under the categories of tax evaders, only one thousand one hundred(1100) client after a period of five(5) years have been identified and one (1) prosecuted for the alleged malfeasance .

Are the regulatory bodies in charge of ensuring compliance effectively carrying out their duties? Are they currently at work or does “the power that be” influence public decision makings as opposed to an ethical, fair, accountable and more transparent “state”?

According to the chairwoman of the Public Accounts Committee, Margaret Hodge –

 I just don’t think the tax authorities have been strong enough, assertive enough, brave enough, tough enough in securing for the British taxpayer the monies that are due.”

The digest of this entire information clearly zooms in to the gap in power exercised by the compliance institutes/personnel’s. It is important that the judicial arm of government support the regulatory authorities in carrying out their responsibilities. This will go a long way to reaffirm compliant organizations of the reward that comes with fostering an ethical and compliant business operation, thus reinforcing the clauses of the law as well as the consequences of non-compliance.

Although the bank claims to have reduced the number of Swiss accounts by almost 70% as well as implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money, a whistle blower stated that the bank was still dealing with tax dodging at the private sector of the bank as at 2013 before she was dismissed of her duties as Head of Compliance positing that the bank had not kept its promises as earlier stated. 

Following a similar case in the United States of America published on the 5th of January 2015, the case of the leading Israeli bank due to pay the sum of $400 million on compensation for helping the US customers evade tax, the United Kingdom should follow suit in aggressive enforcement of laws that promote ethical behaviors in organizations and their dealings with stakeholders funds/investments.

The fines and compensation include $157 million settlement on tax issues with US customer accounts in the banks Swiss branch.

Going forward, financial institutions must be and should be made to report to regulatory bodies on their customer data base, financial inflow and outflow as well as tax due to the customers for reconciliation at least every quarter.

They must register as compliant organizations with reputable and recognized global compliance institutes to officially and transparently prove organizational credibility and level of compliance culture.

They must be made to give account of their annual operations via Annual General Meetings and annual financial reports as well as sustainability reporting.

Conclusively, bringing it back home to Nigeria, this report opines that the financial institutions and services ought to be probed to ascertain the health and wealth of our system. There must be a legislative backing to ensure that if found guilty, these institutions shall be penalized and fines for misconduct.

Conversely, regulatory bodies i.e. the government bodies in charge of taxation at the federal and state level must be mandated to ensure transparency in their dealings. It is important that these bodies account for the taxes paid by the citizens; they should be authorized to publish strategic outlook on project plans prior to a new fiscal year taking into consideration previous taxes paid (amount), categorizing the different corporations as against expected tax, putting into account newly registered companies, the current state of the “state” etc. to help project for future plans, prioritizing development plans as it affects businesses, the economy and the globe in general.

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