The Impact of UK Money‐Laundering Legislation on Fiscal Crime
| DOI | https://doi.org/10.1108/eb025974 |
| Pages | 117-122 |
| Date | 01 April 2000 |
| Published date | 01 April 2000 |
| Author | John Rhodes |
| Subject Matter | Accounting & finance |
The Impact of UK Money-Laundering Legislation
on Fiscal Crime
John Rhodes
Journal of Financial Crime — Vol. 8 No. 2 — Analysis
The author's attention was first drawn to this subject
by one paragraph in the Money Laundering Steering
Group guidelines issued by BBA in June 1997:
'Tax related offences are not in a special category:
the proceeds of a tax related offence may, like the
proceeds of
a
robbery or a burglary, be the subject
of money laundering offences, under the Criminal
Justice Act 1988.'
This paragraph was in such complete contrast to the
traditional approach to foreign fiscal problems that
it made the author sit up and take notice. Of course
he was aware of the changes which had been made
to the Criminal Justice Act in 1993, but suspected
like most other professionals in the City of London
that these did not affect any responsibilities in respect
of foreign fiscal crime.
This traditional approach required UK profes-
sionals to take a strict attitude to any non-declaration
or evasion in relation to UK tax, while allowing
them to turn a Nelsonian blind eye to the possibility
that a foreign tax system was being similarly abused.
It was largely based on the well-recognised principle
that the courts of one country will not enforce the tax
demands of another, of which the high water mark in
English law is the 1955 case of Government of India v
Taylor.1
In this case the Indian Government attempted to
recover an Indian tax liability through the English
courts from the liquidator of an Indian company.
The company had made a large profit on selling
assets in India to the Indian Government, which
was then embarrassed to find the proceeds of sale
had been swiftly removed from India without pay-
ment of tax. So proceedings were started in England
against the liquidator because he was resident here.
The action was pursued through to the House of
Lords,
but never got off the ground. Viscount
Simonds gave the leading judgment in the Lords, in
which he relied on four main points:
(1) Case law going back over 200 years, including
a scries of 18th-century cases in which Lord
Mansfield had clearly repeated the dictum —
'for no country ever takes notice of the revenue
laws of another'.2
(2) The fact that the Foreign Judgments (Reciprocal
Enforcement) Act 1933 excluded 'a sum payable
in respect of taxes or other charges of a like
nature or in respect of a fine or other penalty'.
(3) Evidence produced that other countries, such as
Eire,
France and the USA would not allow the
collection of foreign taxes through their courts.
(4) The rule as stated in Dicey's authoritative treatise
'The Conflict of Laws' that 'the English courts
have no jurisdiction to entertain an action for
the enforcement, either directly or indirectly,
of a penal, revenue, or other public law of a
foreign state'.
The philosophical basis of the rule was debated in the
case.
Lord Keith concluded that enforcement of such
claims is an extension of the sovereign power that
imposed the taxes and that 'an assertion of sovereign
authority by one state within the territory of
another ... is (treaty or convention apart) contrary
to all concepts of independent sovereignties'. It was
also thought inappropriate for one country to
become involved in what might turn out to be the
penal or confiscatory actions of another.
It was argued that the English courts might con-
sider collecting taxes which they could classify as
non-penal, in other words 'the sort of tax which is
recognised in this country', but Viscount Simonds
stated that he was not 'disposed to introduce so nice
a refinement into a rule which has hitherto been
stated in terms that are so easy to understand and
apply'.
In taking this line the English courts have in effect
left it to governments to determine which tax
regimes, if any, should be assisted by introducing spe-
cific enforcement provision in tax treaties. To the
author's knowledge, however, there are as yet no
UK treaties that comprehensively do this.
The 1998 OECD Report on Harmful Tax Com-
petition5 examines the effects of widely differing tax
regimes around the world and focuses on the need
Journal of Financial Crime
Vol.
8, No. 2,2000. pp. 117-122
© Henry Stewart Publications
ISSN 0969-6458
Page 117
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