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Income Tax - Compliance and Investigation Unit

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Friday 04 January 2013

During 2012 the Income Tax Compliance & Investigation Unit (which consists of a dedicated Unit assisted by other Income Tax Office staff) carried out 162 enquiries from which they discovered omissions of income or incorrect claims for allowances totalling approximately £9.5m and recovered tax, late payment surcharges and penalties of £2,994,188.

Rob Gray, Director of Income Tax, said:

"Despite 2012 being a challenging year, I am extremely pleased by the continuing efforts of the unit and their colleagues in other sections in the Income Tax Office who carry out direct investigations into tax evasion and avoidance. The results for 2012 - almost £3 million - are the highest for a single year and, in addition to the substantial additional revenue collected, the investigations also ensure non-compliant taxpayers are identified, making it more difficult for them to continue to evade their income tax obligations throughout the remainder of their taxpaying lives."

The dedicated unit is also responsible for dealing with all elements of the exchange of information both internationally and domestically, which includes jurisdictions with which Guernsey has relevant agreements, thereby assisting in combating tax evasion on a global scale.

The work of the unit continues to prove its value to both the financial and reputational wellbeing of the island.

Deputy Jan Kuttelwascher, Deputy Minister, Treasury & Resources Department, said:

"The Treasury & Resources Board has recently discussed the investigation of tax evasion and avoidance which is carried out by the Income Tax Office and fully endorses and supports the Director's ongoing efforts to combat this socially unacceptable behaviour which, given the current financial climate, is receiving increased global media attention ."

Although the majority of the taxpaying public are fully compliant in meeting their income tax obligations, a proportion fails to be so. The Director's ability to fully investigate suspected tax evasion has increased considerably in recent years, which he attributes to:

· Broad legal powers to obtain from others information relevant to a person's income tax affairs.

· Closer working with Law Enforcement.

· Information received under the EU Savings Directive.

· Information available from other territories through Tax Information Exchange Agreements.

· Information from members of the public concerning taxpayers they believe are evading tax.

Mr Gray said:

"The effect of these additional powers and sources of information is that the net is continually being closed on the minority who attempt to evade or avoid paying the correct amount of income tax. In the past, tax evasion was often considered a "soft crime", but the effects impact on every person who uses public services, as it is the taxes that we pay that fund those services. Tax evasion is not a crime against the Income Tax Office but against the whole of the island, including the tax evader's own family, friends and work colleagues who may have to pay more tax as a result."

The seriousness the Director places on this aspect of the Income Tax Office's work is evidenced by the fact that he is prepared to refer appropriate cases for consideration of prosecution. Since 2009 there have been 6 successful prosecutions. The most recent conviction was in December 2012, where the defendant had previously submitted incorrect returns.

Mr Gray said:

"This case highlights that if a non-compliant taxpayer continues to attempt to evade income tax after their earlier attempts have been discovered they can expect the matter to be referred for prosecution."

In December 2010, the Director announced the introduction of the Income Tax Irregularities Scheme ("ITIS"), which was a "once only" disclosure facility enabling taxpayers to put any irregularities in their income tax affairs in order. ITIS was a success, with 153 registrations being made resulting in additional revenue of £2.4m.

Following the end of ITIS, non-compliant taxpayers who chose not to take advantage of the scheme, and who are subsequently discovered, face the full implications of their tax evasion. This includes a minimum penalty of 100% for any year prior to the calendar year 2011.

Notwithstanding the end of ITIS, it is still possible, under the Income Tax Law, for non-compliant taxpayers to put their income tax affairs in order, in cases of negligence, without incurring penalties (although late payment surcharges would continue to be applied) provided they do so before the Income Tax Office starts an investigation.

Mr Gray said:

"I would strongly urge any taxpayer who has concerns that their tax affairs may not be in order to contact officers within the Compliance & Investigation Unit, without delay, in order that any such irregularities may be corrected."

Finally, the Director would like to thank those members of the public who have provided information concerning suspected tax evasion or avoidance. It is common for the Director to receive information in the form of letters or e-mails. A dedicated Tax Evasion Hotline is also available, enabling members of the public to pass on information directly to the Income Tax Office in the strictest confidence. Callers to the Tax Evasion Hotline can remain anonymous if they wish.

The number of the Tax Evasion Hotline is 747900. Information can also be sent by e-mail to: hotline@tax.gov.gg, which again, is treated in strict confidence.

ENDS

Issued by:

Rob Gray, Director of Income Tax, Income Tax Office

Contact for media enquiries:

Nigel Garland, Deputy Director (Compliance & International) (tel: 724711)

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