The Organisation for Economic Co-operation and Development (OECD) provides a comprehensive guide to fighting tax crimes, Fighting Tax Crime: The Ten Global Principles. The guide introduces a framework for criminal tax investigators worldwide, outlining ten key principles to follow in increasing tax compliance.
Principle 1 – ensure tax offences are criminalised
Jurisdictions should have the legal framework in place to ensure that violations of tax law are included as a criminal offence, and that effective sanctions apply. This helps to send a message that nobody is ‘above the law’, as well as acting as a deterrent for people considering evading their tax responsibilities.
Whatever the specific details of each jurisdiction’s particular legal framework, it will be most effective if:
- The law clearly defines the tax offences that are criminalised
- There is a clear definition of who can be held criminally liable, including third parties that help facilitate the offence and business entities
- A criminal sanction (penalty) applies if the offence is proven
- More serious offences are punishable by more serious criminal sanctions
- The law that criminalises tax offences is effectively enforced
Principle 2 – devise an effective strategy for addressing tax crimes
Each jurisdiction should have a detailed strategy for addressing tax crimes that identifies:
- The objectives of the tax authority
- Risks of non-compliance with the tax law
- Resources available to address these risks
- Challenges for the tax authority in addressing risks and how these can be mitigated
- Operational plan for achieving objectives
- Communications strategy
- Performance review plan
Principle 3 – have adequate investigative powers
Jurisdictions must have appropriate investigative powers to successfully investigate tax crimes, including:
- Power to obtain third party documentary information
- Search powers
- Power to intercept mail and telecommunications
- Power to search and seize computer hardware, software, cell phones and digital media
- Power to interview
- Power to conduct covert surveillance
- Power to conduct undercover operations
- Power to arrest a person
Principle 4 – have effective powers to freeze, seize and confiscate assets
Jurisdictions should have the ability to freeze, seize and confiscate assets:
- Freezing – temporarily suspending the rights over an asset (e.g. a bank account)
- Seizure – temporarily restraining an asset or putting it into the custody of the government (e.g. a vehicle)
- Confiscation (or ‘asset forfeiture’) – generally used after the final outcome of a case, to stop criminals from accessing assets obtained from a crime
These methods help to disrupt criminal activity, prevent further criminal activity, and act as a deterrent measure in reducing the profitability of committing tax crimes.
Principle 5 – put in place an organisational structure with defined responsibilities
A jurisdiction should have an organisational model with defined responsibilities for fighting tax crime and other financial crime.
Establishing a clear organisational model allows for efficient allocation of responsibilities, as well as greater transparency and accountability for the use of resources and deployment of strategies.
Principle 6 – provide adequate resources for tax crime investigation
Tax crime investigation agencies should have adequate resources, including:
- Financial resources – having the required budget and funding to pay for the needs of the agency
- Human resources – having a sufficient number of staff with appropriate knowledge, expertise and skills to work on tax crime investigations
- Infrastructure resources
- Organisational resources
- Data and technology resources
Principle 7 – make tax crimes a predicate offence for money laundering
Jurisdictions should designate tax crimes as one of the predicate offences for money laundering.
Predicate offences are crimes that produce funds or assets, which may then be laundered to obscure the illegal source. For example, the predicate offence of drug trafficking can generate revenue, and laundering this revenue can allow the trafficker to use the funds without creating suspicion of criminal activity.
The implications of designating a crime as a predicate offence are that the offender can be charged with the offence of money laundering, as well as the predicate offence itself. This may allow authorities greater scope to secure a conviction and/or impose greater penalties.
Principle 8 – have an effective framework for domestic inter-agency cooperation
Tax crime investigations can involve a number of government agencies, each having unique strengths or information that can support another agency’s investigation of the crime. This makes co-operation amongst the relevant agencies very important and beneficial, and an effective legal and administrative framework should be in place to facilitate this.
Forms of co-operation may include information sharing, joint investigation teams and inter-agency centres of intelligence.
Principle 9 – ensure international cooperation mechanisms are available
Tax crimes frequently have an international element, for example international money laundering. As the powers of investigation agencies are limited by jurisdictional boundaries, international co-operation is essential for the effective investigation and prosecution of tax crimes. There should be a legal agreement setting out the terms and procedural requirements of this co-operation.
Principle 10 – protect suspects’ rights
A person accused of committing a tax crime must be afforded basic fundamental rights, including:
- The right to be presumed innocent
- The right to be advised of one’s rights
- The right to be advised of what one is specifically accused of
- The right to remain silent
- The right to consult a lawyer
- The right to interpretation and translation
- The right to access documents and case material
- The right to protection from double jeopardy