Individual Tax Evasion Expected In 2013 To Rise As Austerity Bites

Why You Might Be More Like Starbucks, Amazon and Google Than You Thought

Despite the public anger surrounding international companies such as Google, Amazon and Starbucks over how much tax they pay in the UK, more members of the public are expected to dodge their taxes in 2013, as Brits feel the impact of the government's austerity measures.

Research by auditors KPMG showed a five times increase in the number of individuals over-claiming benefits or evading tax - and the trend is set to continue for 2013.

"Tax evasion is one of the hot topics of the moment but an increasing assault on the social welfare budgets, particularly benefit fraud, is a real and increasing threat for the government, as shown by the latest figures," explained Hitesh Patel, UK forensic partner at KPMG.

"For all the talk of austerity, measures really kick in this year and accordingly we expect to see an increase in this kind of fraud this year as personal pressures mount for individuals.

"Fraudulent actions of individuals in both the public and private sectors exacerbate the need to make cuts in the first place, and cause more than just monetary loss: jobs can be lost and already tight government budgets are stretched further, with implications for the delivery of services."

KPMG also revealed examples of some of the more brazen fraudsters from 2012, including:

  • A finance department employee stole hundreds of thousands of pounds to fund an extravagant lifestyle; the discovery led to the company being placed into administration and the loss of all twenty of her colleagues' jobs
  • A family who used false identities to claim £2.2 million in HIV medication; the medication was then shipped to Africa and sold at a profit
  • A 33-year-old woman was able to obtain property loans worth £13m, simply by posing as a South African heiress
  • One director at an engineering firm used a variety of scams, including transferring cash to a club where he acted as secretary and giving himself an unauthorised five-digit salary increase, to misappropriate more than £1.5m in order to pay for an online bingo habit. The fraud brought the company to its knees financially, only surviving as a result of all staff being put on reduced hours and the remaining directors working for free.
  • A charity accountant used falsified invoices to justify writing up cheques that were subsequently paid into accounts he controlled. The fraudulent payments, totalling more than £560,000, were then covered up using transfers between subsidiary companies in order to balance the year-end accounts. The ill-gotten gains were used to fund an addiction to collecting second-hand vehicles.
  • The directors of a recycling plant took to weighing plant, machinery and even lorries in order to generate falsified weighbridge tickets claiming to be for recycling quantities of glass for local authorities. The total loss through fraudulent invoices was estimated at £2m.

"Organisations need to consider these basic fraud threats, as well as the new and complex threats," warned Patel.

A crack-down on evasion has already been announced by the Crown Prosecution Service (CPS). Keir Starmer, the director of Public Prosecutions, has promisedto "ramp up" the number of cases it pursues by five-fold over the next two years.

Smaller-scale tax cheats – including middle-class homeowners who don't declare their rental incomes and white-collar professionals who invest in evasion schemes – will be targeted as the CPS is determined to maximise the deterrent effect of prosecutions.

Speaking on the Today programme, Starmer said: "Big tax avoidance schemes, if they are dishonest, will be prosecuted, and we proved last year in an important case that we are capable and able to prosecute those schemes."

When asked why action is being taken now, Starmer said it was partly down to "the economic environment in which we find ourselves".

"It is of course always important to prosecute tax evasion but never more so than in this sort of hardship that we find ourselves in now."

However, Murray Worthy of UK Uncut, which campaigns for alternatives to government spending cuts, told the Express the CPS was targeting the wrong people.

"There is an incredible amount of hypocrisy in targeting people at the bottom for what are often very small amounts while ignoring the billions being avoided by the biggest companies," he said.

"That is where the government should be putting its attention. I don't think this will be seen as a genuine attempt to tackle the problem. If they think that going after plumbers working for cash in hand will dispel public anger, they are very much mistaken."

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