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Storm Gathers Over UK Plans To Seize Owed Taxes Without Legal Clearance

Tom Burroughes

12 May 2014

A political storm is brewing in the UK over plans by the government to let the national tax authority seize taxes owed from private bank accounts without a court order.

Finance minister George Osborne set out in his annual budget, held in March, plans to allow HM Revenue & Customs to make such seizures, part of a general push by the administration to continue its drive against alleged tax cheats in the UK. The move is part of a wider drive by the administration to hunt tax evaders, and certain kinds of tax avoiders, in the UK and overseas.

The move, however, has already sparked criticism from lawmakers in parliament, such as the influential House of Commons Treasury Select Committee. It issued a report on the matter last week. It is feared such powers violate due process of law. Such worries are not confined to the UK; in recent years, the German government used taxpayers’ money to buy stolen bank data from Switzerland, whereas the US government, with its worldwide system of tax, has enacted sweeping extra-territorial powers to hunt down alleged tax dodgers abroad.

There are also concerns that developments such as the government’s General Anti-Abuse Rule, or GAAP, create wide-ranging, but vaguely defined, powers that could be abused. There are also fears that the line between tax evasion – long regarded in UK law as a criminal issue – and tax avoidance – which has not been – have been blurred, making legitimate tax planning impossible.

"Plans to allow HMRC to take money directly from the accounts of tax delinquents are a fundamental assault on the rule of law,” Eamonn Butler, director of the , a UK-based think tank, said.

"Next year is the 800th anniversary of Magna Carta, but the basic civil protections it gave citizens against arbitrary power are being systematically eroded. Governments have become elected dictatorships. HMRC can already decide that someone owes tax that they have deliberately 'avoided' – even if they have complied with every tax law. This is arbitrary power that we cannot safely entrust to any official. Reinforcing that power with further powers of confiscation – in the absence of any magistrate or court decision – is even more dangerous,” Dr Butler said.

"Even fair-minded officials make mistakes. Worse, the new plan passes the burden of proof – and the costs of proving it – from the authorities to the citizen. That is contrary to the fundamental principle that people are innocent until proven guilty,” he continued.

"Perhaps 17,000 people will be affected by this each year. Many of them will, of course, be people who are completely innocent and the subject of official mistakes. Some will see their businesses ruined, and their employees losing their jobs, because of officials arbitrarily raiding their accounts. Others, worryingly will be people who the authorities decide to bully and make an 'example' of just because they are well known,” Dr Butler added.

According to the proposed measures, the HMRC has the automatic right to take money from a bank account when the holder has failed to act on four formal warnings requiring payment. At present, officials can only remove money with the consent of a magistrate or judge.

The Treasury Select Committee’s report said: “The ability directly to have access to millions of taxpayers’ bank accounts raises concerns about the risk of fraud and error.”

(Editor’s comment: The concerns expressed by lawmakers and the ASI, among others, are spot-on. For far too long, it has been easy for politicians of different parties to secure easy headlines about “cracking down on tax cheats” and then enact powers that destroy ancient principles of law. It is not good enough for policymakers to claim that such concerns are old-fashioned, out of date and belonging to an age where people wore frock coats and wigs. Sadly, as governments are still short of revenue and try to close massive deficits, it is too easy to take this route in the hope that there will be only a brief media and political storm, followed by apathy, or that only a few voters, such as the rich, will suffer. The consequences of such action will be lasting and undermine further confidence in the public authorities and the rule of law. Bearing in mind that we have a supposedly Conservative and Liberal Democrat coalition government, this is a sad state of affairs. Giving such powers to tax collectors ought to alarm any conservative or liberal worthy of the name. Come to that, even those on the left of the political spectrum ought to be concerned.)