Tax Evasion: Update on the Proceeds of Crime Debate
| Published date | 01 February 2000 |
| Pages | 371-372 |
| Date | 01 February 2000 |
| DOI | https://doi.org/10.1108/eb027254 |
| Author | Martyn J. Bridges,Peter Green |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 3 No. 4
CASE NOTES
Tax Evasion: Update on the Proceeds of
Crime Debate
Martyn J. Bridges and Peter Green
This paper considers the argument that the financial
benefit (or 'pecuniary advantage') derived from tax
evasion does not represent the proceeds of crime for
the purposes of the money-laundering legislation.
The paper then considers a recent Court of Appeal
case concerning an appeal against a confiscation
order in relation to tax evasion, and its potential
implications for those seeking to defend charges of
tax-related money laundering.
THE LEGISLATION
The domestic money-laundering legislation applies
to the proceeds of domestic and foreign tax evasion.
The authors consider this to be a simple statement
of fact. However, there are dissenters who argue
that the financial benefit derived from tax evasion is
fundamentally different to the financial benefit
derived from 'conventional' criminality; it is there-
fore argued that the money-laundering legislation
does not apply.
It could be said that the phrase 'proceeds of
criminal conduct' used in the money-laundering
legislation cannot apply to the proceeds of tax evasion
since 'proceeds' generally means funds obtained
rather than retained. However, s. 93A(2) Criminal
Justice Act 1988 (CJA 1988), as amended by the
Criminal Justice Act 1993, when read in conjunction
with s. 71(5) CJA 1988, seems to defeat such an
argument.
Section 93A(2) states 'In this section, references to
any person's proceeds of criminal conduct include a
reference to any property which in whole or in part
directly or indirectly represented in his hands his
proceeds of criminal conduct.'
Section 71(5) extends the definition of 'benefit' to
any pecuniary advantage derived 'as a result of or
in connection with the commission of an offence'.
Where such a pecuniary advantage is obtained
'... he is to be treated ... as if he had
obtained...money equal to the value of the pecuni-
ary advantage'. This would appear to extend the
concept of 'proceeds' to sums unlawfully retained as
a result of criminal activity. A tax evader clearly
derives a pecuniary advantage as a result of retaining
funds that should be paid in tax, and this pecuniary
advantage is as a result of, or in connection with,
the commission of a crime.
It has been argued that where the underlying con-
duct which generated the profit is legitimate, the fact
that tax is not subsequently paid upon those profits
does not make the 'tax element' the proceeds of
criminal conduct. By contrast, it is said, the drug
dealer's profits derive entirely from criminal conduct.
The authors have maintained the view that even
when the underlying conduct that generates the
profit is legal, retaining money that should properly
be paid in tax involves criminal conduct; the benefit
therefrom, being the tax unlawfully retained, must
be the proceeds of criminal conduct (see Journal of
Money Laundering Control, Vol. 3, No. 1). There is
now judicial authority to support this view.
R V ALLEN
Brian Roger Allen was convicted at Knightsbridge
Crown Court on 13 counts of cheating the public
revenue of income and corporation tax by concealing
or failing to disclose profits made by offshore com-
panies which were managed and controlled by him
in the UK. There was no suggestion that the
underlying activities which generated the profits
were illegal.
The appeal against conviction to the Court of
Appeal1 was unsuccessful; a further appeal2 was
brought against a confiscation order of £3,137,165
(with seven years' imprisonment in the event of
default to be served consecutively). Mr Allen was
said to have evaded some £4 million in tax; however,
the confiscation order was set at £3,137,165 being the
Journal of Money Laundering Control
Vol.
3, No 4, 2000, pp. 371-372
Henry Stewart Publications
ISSN 1368-5201
Page 371
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