Friday 20 March 2015
During 2014, Guernsey's Income Tax Office dealt with 344 cases from which it was identified that there were omissions of income, or incorrect claims for allowances/deductions, totalling approximately £7.1 million, and through tax, late payment surcharges and penalties additional revenue of £1.8 million was recovered and collected for the island through compliance activity.
Director of Income Tax Rob Gray said:
"Whilst the vast majority of Guernsey taxpayers pay the tax that they are required to pay, a minority do not. The Income Tax Office remains committed to dealing with those who choose to cheat the tax system, to the detriment of all law abiding and tax paying islanders.
It is vital to do this as the States of Guernsey relies on monies raised through general revenue, which is mostly derived from payment of income tax, to fund essential public services in the Island, such as education, health and pensions."
The £7.1 million additional income assessed related to the following:
- £2.8 million relating to omitted investment income. Included within this figure was a voluntary disclosure of additional investment income in excess of £700,000. Another case of omitted investment income, in excess of £500,000, was investigated following information received by the Income Tax Office. Both cases involved several years of omissions.
- £1.9 million of under declared profits from local businesses. A significant case included within this was a voluntary disclosure from a local company of omitted business profits of over £800,000, over a number of years.
- £0.6 million of false claims for allowances or deductions, primarily relating to false claims for mortgage interest (such as claims which included capital repaid, and claims including interest for non-allowable purposes, such as claims for interest paid to buy boats, cars etc). The Income Tax Office has identified numerous cases involving false claims for mortgage interest. By way of example, one case included a claim for capital repayments, in addition to the interest paid, over a period exceeding 20 years. Another case included a claim for mortgage interest, where the loan was actually for mixed use purposes, part of the loan having been used to purchase a boat, and not the principal private residence of the individual. This was incorrectly claimed for over 5 years.
- £0.9 million of omitted property income, relating to the letting of both local and overseas properties. This includes a case where Guernsey property income of almost £200,000 was received by a non-resident individual, over a number of years, and not disclosed.
- £0.2 million of omitted employment income (including tips, gratuities and benefits in kind).
- £0.7 million omission of other sources of income (such as pensions etc).
Of the above, £3.2 million of income was identified as a result of voluntary disclosures (which accounted for 104 of the 344 cases resolved during 2014), including those made under two disclosure facilities that are currently running called BIRD and EMIRD (see editor's notes). These two disclosure facilities are part of the Stop Tax Evasion Programme launched by the Director of Income Tax on 1 July 2014 to raise public awareness of persons cheating the tax system, and to involve the general public in these activities.
An additional £1.7 million of income was discovered as a result of information received by the Income Tax Office (including that received through the dedicated "hotline" and online reporting facility) (which accounted for 35 of the 344 cases), and £2.2 million as a result of enquiries made on the basis of returns submitted (which accounted for the remaining 205 cases).
The Director of Income Tax said:
"Despite 2014 being a challenging year for the Income Tax Office, I am extremely pleased by the combined efforts of all of my colleagues in the office who are involved in the various compliance activities and carrying out direct investigations into tax evasion and avoidance. In addition to the £1.8 million additional revenue collected, these investigations also ensure that those non-compliant taxpayers identified comply with their obligations for future years, and a message is sent to those that still engage in this activity that the price can be high when they are discovered, in monetary terms but also to their reputation, and possibly their liberty, if the decision is made to prosecute.
The Income Tax Office will shortly be receiving information from local banking businesses, and some members of the public who don't play by the rules may be worried that errors in their income tax affairs will be brought to light. The BIRD and EMIRD disclosure facilities were introduced, to assist those people who now want to put right such deficiencies as quickly and as cost effectively, as possible. Almost half of the total identified omissions during 2014 related to investment income and false claims, which could have been covered by these disclosure facilities. This demonstrates the importance of publicising these disclosure facilities before they cease at the end of March.
After the expiry of the BIRD and EMIRD disclosure schemes, anyone who is discovered to have evaded tax, and who has chosen not to take advantage of these two disclosure facilities, will be subject to whatever penal provisions are available in the Income Tax Law, including the possibility of being referred for prosecution."
Deputy Gavin St Pier, Minister, Treasury and Resources Departments, said:
"The Income Tax Office is to be congratulated on unearthing these people who choose not to comply with the law, and for bringing an additional £1.8 million into the island's treasury as a result. Tax evasion is often considered a "soft crime" against the Income Tax Office, but the reality is that it is perpetrated against the whole of the island, including the tax evader's own family, friends and work colleagues. Tax revenues are used to fund vital public services such as health, education and public and social welfare, and those who evade tax, have a negative effect on the wellbeing of these vital public services.
I would also continue to encourage members of the public to help the Income Tax Office by passing on any information that they have which could be useful in detecting tax evasion committed by others, either through the Tax Evasion Hotline telephone line, email address or the online reporting form. All information received anonymously is treated in strict confidence. Together we can make a difference."
The number of the Tax Evasion Hotline is 747900. Information can also be sent by e-mail to: email@example.com, and the online reporting form and any information relating the Stop Tax Evasion Programme and both the BIRD and EMIRD Disclosure facilities can be found at: https://www.gov.gg/step