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Fiscal documents, money, and crime

In preparation for the International Colloquium entitled Tax Evasion, Corruption and the Distortion of Justice, which will be held on Zoom on the 21st of June 2023, we are releasing a synopsis of the article “Policing Fiscal Corruption: Tax Crime and Legally Corrupt Institutions in the United Kingdom, recently published in the Duke University Law School’s Journal of Law and Contemporary Problems. Join for free on Zoom what promises to be a fascinating discussion using the following link (free registration):

The event is aimed at disseminating the publications included in the Special Issue “Tax Evasion, Corruption and the Distortion of Justice,” which has been edited by Prof. Diane Ring, Dr. Costantino Grasso, and Dr. Lorenzo Pasculli, and has been recently published in the Duke University Law School’s Journal of Law and Contemporary Problems. Top-level experts and relevant stakeholders will discuss The articles in the Special Issue to establish a fruitful knowledge-exchange process.

“Policing Fiscal Corruption” has been authored by Dr. Branislav Hock, who serves as a Reader in Economic Crime & Compliance and the Lead of the Economic Crime Research Group at the School of Criminology and Criminal Justice (SCCJ) of the University of Portsmouth. During the International Colloquium, the article will be discussed by Prof. Elizabeth Dávid-Barrett, Head of the Global Program on Measuring Corruption at the International Anti-Corruption Academy and on leave from the University of Sussex, and Li Huang, a Ph.D. candidate in Criminology, Law, and Society at the University of California, Irvine.

“Policing Fiscal Corruption” explores the relationship between corruption and inequality, with a particular focus on the United Kingdom. The deficiencies in governance systems and the poor quality of government are seen as factors contributing to corruption and inequality. The article also discusses the manifestations of fiscal corruption, including tax evasion, avoidance, and aggressive tax planning. It analyses the laws and regulations related to tax crime in the United Kingdom and identifies deficiencies in countering such a phenomenon. The collective action perspective is applied to evaluate societal problems related to fiscal corruption and assess anti-corruption efforts.

Delving into the key sections of the article, Part II of the article includes a critical examination of significant pieces of legislation in the United Kingdom that pertain to tax crime. The United Kingdom’s legal system has established laws and regulations to combat tax crime and abusive tax practices, including specific offenses for tax evasion and fraudulent activities and broader anti-economic crime laws crucial in tackling tax-related offenses. The common-law offense of cheating the public revenue covers serious tax evasion offenses. However, successfully prosecuting tax fraud can be challenging due to the high standard of proof and the subjective test of dishonesty. The article also explores statutory offenses related to tax evasion. Additionally, it critically analyses the Criminal Finance Act 2017, which establishes offenses for businesses that fail to prevent the facilitation of tax evasion by their associated persons. This shift towards “failure to prevent” offenses reflects a trend of private enforcement and proactive self-policing of economic crimes. However, substantive laws are fragmented in combating fiscal corruption.

Moving on to Part III, the article discusses the manifestations of fiscal corruption in the United Kingdom. The concept of fiscal corruption encompasses both substantive and institutional forms of corruption related to taxation. Substantive manifestations include tax evasion and tax avoidance schemes that exploit deficiencies in tax laws, resulting in reduced tax collection and potential economic inequality. Institutional manifestations involve the misuse of power and influence by private actors in shaping legislation and regulation and weaknesses in the institutional setup of public agencies.

In terms of substantive manifestations, the United Kingdom experiences a significant tax gap. Tax avoidance is still a concern. Alternative estimates suggest higher costs associated with tax evasion and avoidance. Regarding institutional manifestations, economic crimes, including tax fraud, have historically been perceived as victimless crimes, leading to a lack of prioritization in enforcement. The influence of private actors in legislation and regulation, limited criminalization of abusive tax practices, inadequate transparency regimes, and deregulation are identified as institutional weaknesses contributing to fiscal corruption. The use of complex corporate structures and offshore tax havens further exacerbates the problem.

The article highlights the need for a holistic approach to addressing fiscal corruption, which includes criminalizing corrupt acts associated with tax crimes and addressing systemic issues in governance and enforcement. It emphasizes the negative consequences of fiscal corruption, such as reduced tax collection, misallocation of resources, distortions in market competition, and under-resourcing of public services, eroding public trust in institutions.

Part IV of the article discusses the concept of collective action as a framework for understanding fiscal corruption in the United Kingdom. The collective action perspective posits that individual incentives often conflict with collective interests, leading to undesirable outcomes. The provision of public goods, such as enforcing laws against economic crime, is a collective action problem. When countries rely on others to police bribery or corruption, they free-ride on the efforts of those who invest resources in law enforcement.

The article highlights three examples related to fiscal corruption in the UK. Firstly, corporate secrecy and offshore arrangements contribute to fiscal corruption by enabling tax fraud and economic crimes. Despite promoting transparency, the UK benefits from these practices, creating a dilemma between combating fiscal corruption and reaping the advantages. Secondly, the fragmented legal and institutional landscape poses challenges in policing fiscal corruption. Multiple authorities, each with different competencies, may hinder cooperation and coordination. Finally, private policing and responsibilization strategies are increasingly employed to address corporate crimes. However, the collective action perspective emphasizes the conflict between public interest and business interests, raising concerns about the effectiveness of private policing in combating fiscal corruption.

Understanding fiscal corruption as a collective action problem can shed light on the difficulties faced in addressing it. Cooperation, coordination, and alignment of interests are crucial in overcoming these challenges. Future research should explore the barriers to effective cooperation among public authorities and evaluate the potential of different private policing arrangements.


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