Tax Evasion, is SAP Tax and Revenue Management the Answer?

Curbing tax evasion has long been a priority for Governments globally, with Revenue Collection Agencies using increasingly sophisticated methods to detect possible fraud and recoup monies owed to help close the tax gap. Industry solutions like SAP Tax and Revenue Management can help Revenue Authorities to increase efficiencies in the collection process, but what else are Governments doing to help recover taxes owed?

As part of the British Government’s 2010 Spending Review, it was announced that an investment of £917 million would be made available to help tackle tax avoidance, evasion and fraud. This investment enabled the UK’s Tax Agency (HMRC) to increase the number of people focussed on these areas, enhance their skills, expand the use of third party data and develop tools that would help identify even the most hidden forms of tax evasion. In December 2012, the British Government reaffirmed this commitment by investing a further £77 million in HMRC avoidance and evasion work. This investment, it seems, is starting to pay off…

Earlier this month The Financial Times reported that the number of criminal prosecutions for tax evasion in the UK had more than doubled over the past year, as the HMRC stepped up its efforts to crackdown on individuals suspected of defrauding the Exchequer. Tax evasion prosecutions rose from 302 in 2011-12, to 617 in 2012-13, according to figures obtained by international law firm, Pinsent Masons. This increase, says The FT, reflects a pledge made by the British Treasury in 2010 to increase the number of tax prosecutions fivefold, in an effort to create a more robust deterrent against tax evasion.describe the image
Tax-EvasionDespite this increase in prosecutions, Pinsent Mason also reported that the number of incidences of serious tax evasion (evasion of tax totalling £50,000.00 or more) has actually dropped significantly. Last financial year, local HMRC offices identified 2,888 suspected cases of serious tax evasion – representing a 16% drop on the 3,456 cases that were identified in the previous year. This reduction, they say, was helped by an increase in anti-evasion efforts, including new powers to:

Impose penalties of up to 200% of the original tax owed if an individual does not declare any income or capital gains that has been hidden from HMRC in an offshore bank account.

Create taskforces to help prevent cases of serious tax evasion. For example, the Offshore Coordination Unit (OCU) coordinates HMRC’s analysis of the information it receives on UK taxpayers who have money concealed in overseas deposits.

Use ‘private sector’ experts to improve HMRC’s strategy and use of data to identify possible tax evasion.

Deliver high profile advertising campaigns which are designed to heighten evaders’ discomfort about not declaring all of their income.

An increase in the number of treaties with other countries is also thought to be assisting in efforts to catch tax evaders who hold their assets in offshore accounts. This includes deals with the governments of both Liechtenstein and Switzerland. Phil Berwick, Partner at Pinsent Masons said: “International co-operation has been stepped up significantly as HMRC strives to curb tax evasion. Tax evaders are now realising that HMRC has a much greater ability to tackle evasion, even if individuals conceal their assets abroad.”

Improving the Collection Process with SAP Tax and Revenue Management

Invenio’s Public Sector practice is uniquely placed to offer a rapid, efficient and cost effective deployment of SAP Tax and Revenue Management solutions. Invenio helps Tax Agencies to create a stable foundation for the entire management of the tax and revenue management lifecycle across all tax types to aid efficiency of the entire collection process. SAP Fraud Management has been designed as a platform solution to prevent fraud and non-compliance in various areas tackling the large volume of tax related data compiled in tax authorities.