Taking the Profit out of Crime
| Pages | 26-32 |
| Published date | 01 January 1997 |
| Date | 01 January 1997 |
| DOI | https://doi.org/10.1108/eb027117 |
| Author | Martyn J. Bridges |
| Subject Matter | Accounting & finance |
Taking the Profit out of Crime
Martyn J. Bridges
Journal of Money Laundering Control 1/1
This paper will consider the link between tax
evasion and economic crime and how the tax
system can be used to take the profit out of crime.
TAX EVASION AND ECONOMIC CRIME
The author does not intend to examine in depth
the law relating to the assessment of illegal profits.
However, in broad terms, under UK law, the
profits of an unlawful activity are normally taxable
should the activity represent:
— a trade, profession or vocation, or
— the provision of services for payment.
There are a limited number of exceptions under
the first category. For instance, the 'proceeds' of
robbery are not chargeable to tax.
When considering such activities, the courts
have always rejected any moral argument. Rowlatt
J answered a suggestion that the state was sharing
in the illegality by taxing the illegal profits, in his
usual forthright manner in Mann v Nash,1 as fol-
lows:
'Is the State coming forward to take a share of
unlawful gains? It is mere rhetoric. The State is
doing nothing of the kind; they are taxing the
individual with reference to certain facts. They
are not partners; they are not principals in the
illegality, or sharers in the illegality; they are
merely taxing a man in respect of those
resources. I think it is only rhetoric to say that
they are sharing in his profits, and a piece of"
rhetoric which is perfectly useless for the solu-
tion of the question which I have to decide.'
However, in practice, there are few criminals who
are prepared to enter the public arena in order to
debate the technical issues in the courts!
Tax evasion is inherent in and runs parallel with
economic crime generally. In the developed world,
those involved in economic crime simply cannot
afford to disclose to the revenue authorities the
nature and extent of their commercial activities.
The following article appeared recently in The
Times:
'"Organised crime gangs make $1,000 billion
(£660
billion)
a
year
in
profits
and are so powerful
economically that they pose a threat to develop-
ing countries and emerging democracies," a
United Nations official said yesterday.
"The profits include $1 billion laundered
through global financial markets every day"
Eduardo Vetere, head of the Vienna-based UN
Crime Prevention and Criminal Justice Divi-
sion, told a conference in Manila.
He said that the estimated total of criminal
profits almost equalled the annual budget of the
United States. "Free trade and high-speed tele-
communications make it easier to engage in
multiple activities and launder money across
national borders, with an estimated $1 billion in
crime profits wire-transferred through the world
financial markets each day."
He added, "It has become clear that only by
tackling organised crime in a
concerted manner
can
we hope to make inroads into a problem that
transcends borders and the capacity of national
mechanisms alone.'"
Who knows whether the sums quoted are accu-
rate? However, it is beyond doubt that organised
crime makes enormous profits upon which little or
no tax is paid.
As might be expected, those involved in eco-
nomic crime usually have no desire to pay tax on
their profits and, considering their general dis-
regard for the law and the high-risk environment
in which they operate, it would be surprising in
the extreme to find that they have any regard
whatsoever for the revenue authorities who are
represented in the UK by the Inland Revenue and
HM Customs & Excise.
In practical terms, those involved in economic
crime could never declare their (illegal) taxable
income since their criminal conduct requires an
effective smoke-screen against law enforcement
agencies generally.
Page 26
To continue reading
Request your trial