Tax Crime, Bribery and Corruption.

While often viewed as separate crimes, tax crime and corruption are often intrinsically linked, as criminals fail to report income derived from corrupt activities for tax purposes, or over-report in an attempt to launder the proceeds of corruption. Broadly speaking, where corruption is prevalent in society, this can foster tax evasion.

A recent joint report issued by the OECD and The World Bank highlights some of the key findings relating to the links between tax crime and corruption, and provides recommendations on effectively combating these threats.

 

Cooperation between tax and anti-corruption authorities

Through exploiting modern technology and weaknesses in local legislation, tax crimes, bribery and corruption activities are becoming increasingly complex and conducted across borders.

The links between tax crime and corruption mean that tax authorities and law enforcement authorities can benefit greatly from more effective co-operation and sharing of information, helping to combat both tax crime and corruption.

Tax authorities hold a wealth of personal and company information such as income, assets, financial transactions and banking information, that can be a valuable source of intelligence to anti-corruption investigators.

Similarly, anti-corruption authorities can provide tax administrations with important information about ongoing and completed corruption investigations that could assist a decision to reopen a tax assessment, initiate a tax crime investigation, or more generally promote integrity among tax officials.

Despite the benefits of cooperation between tax and anti-corruption authorities, the report showed that there was still significant room for improvement.

 

Key findings

The report by the OECD and World Bank is based on responses from 67 countries to a survey, which examined the organisational structure for investigating and prosecuting tax crime and corruption, as well as models for inter-agency co-operation in fighting these crimes. The survey was sent to a diverse cross-section of developed and developing countries from all geographic regions.

Countries vary in terms of their tax and legal systems, population, structure of enforcement agencies and rates of compliance. A successful framework for international cooperation will need to be consistent with the domestic context as well as international standards and conventions.  An examination of the co-operation frameworks in place in each country led to a number of key findings:

  • Effective inter-agency cooperation begins with a robust and clearly defined institutional framework. There should be a clear allocation of responsibilities and defined governance arrangements (e.g. decision-making responsibility, accountability, and supervision).
  • Co-operation between tax authorities and anti-corruption authorities is an essential element of the whole-of-government approach to tackling financial crime.
  • Countries should consider the extent to which legal, operational, or cultural/political challenges are undermining effective co-operation.
  • Countries should consider a range of mechanisms to increase instances of information sharing between their tax authorities and anti-corruption authorities. For example, having identifiable contact points within each agency and ensuring that key individuals within each agency have a clear understanding of the types of information and powers the other agencies possess.
  • It is important that tax examiners and auditors can detect corruption red flags and that corruption investigators can identify indicators of tax crime. Countries are encouraged to consider including training on these matters as part of the core curriculum for tax examiners/auditors, tax crime investigators, and corruption investigators.
  • Countries have experienced positive results from the use of joint operations and taskforces that involve tax authorities and anti-corruption authorities. The benefits include increased investigative and enforcement capacity, enhanced information sharing and increased deterrence. Parallel investigations, co-ordination fora, and joint intelligence centres are important mechanisms to enhance information sharing and other forms of cooperation.
  • Staff secondments and the co-location of personnel, automatic review of the tax affairs of persons sanctioned for corruption, and income and asset registers can also support co-operation between tax authorities and anti-corruption authorities.

Nyman Gibson Miralis provide expert defence in complex domestic and cross-border cases involving tax crime, bribery and corruption. Contact us if you require assistance.