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Insight

Prosecutions for tax fraud up 83% in two years

In September 2010 the Chief Secretary to the Treasury, Danny Alexander, pledged to make funding available to HMRC for a five-fold increase in criminal prosecutions for tax evasion. In January 2013, the incumbent DPP, Kier Starmer, said, in respect of non-organised tax fraud, that the CPS was aiming to prosecute seven times as many people in 2014/15 as it had done in 2010/11. How are HMRC, and the CPS, getting on with those goals? According to a parliamentary answer given on 10 September 2013, in tax year 2010/11 420 prosecutions (which in this context means 'decisions to charge' rather than 'trials' or 'convictions') were initiated for tax fraud. In 2012/13 the figure was 770. This is a dramatic increase (83%). However, to meet the commitments made by the Treasury and the DPP, there will have to be similarly dramatic increases in 2013/14 and 2014/15.

There were prosecutions for an astonishing 20 separate statutory offences (who knew that there were so many different ways of committing a tax evasion offence?) and two common law offences.

Our request for a breakdown of how many prosecutions there were for each offence (made under the Freedom of Information Act) was refused. However, we understand that most prosecutions were for cheating the public revenue (one of the two common law offences) or under section 35 of the Tax Credit Act 2002.

Of course, prosecutions are only one side of the story. But, they are the only side that Ministers, HMRC and CPS can control. It is for a defendant (via a guilty plea), a magistrate (on summary judgment), or a jury (for crown court cases) to determine whether or not there will be a conviction. Another parliamentary answer, this time on 8th October 2013, provides figures for conviction rates. They have increased in recent years - from 90.45% in 2009/10 to 93.75% in 2012/13. This seems extremely impressive, particularly in the face of a significantly higher number of completed prosecutions. However, it should be borne in mind that it will be some time before it can be determined accurately whether there has been an impact on the conviction rate occasioned by the increase in prosecutions- because there is a significant time lag between a decision to charge and the outcome of any eventual trial (often a number of years).

Accordingly, it will be important to keep an close eye on the conviction rate going forward. A significant decrease in the conviction rate would be unacceptable for both fiscal and societal reasons. It would point towards the CPS failing in its assessments of whether there would be a realistic possibility of conviction before proceeding to charge. It would involve a vast waste of public funds. And, the damage caused to innocent individuals caught up in the system would be all but incalculable.

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