Business, Government, Legal, Society, Taxation

New tax offence to be made within Criminal Finances Act 2017

TAX EVASION

The UK Government is expected to bring into force a new tax offence in the Criminal Finances Act 2017. It is likely to become law in September.

What is startling about the new offence is that it will make a business guilty as a result of the criminal conduct of its employees and others who may act on its behalf.

Where an individual facilitates tax evasion the business will be guilty of failing to prevent that facilitation unless it can demonstrate that, at the time of the employee’s conduct, it had appropriate procedures in place to prevent facilitation arising.

This new offence will have an immediate impact for many firms. Implicitly, it also shows the UK Government’s preferred direction of travel for corporate liability, i.e. to criminalise business for the actions of connected persons.

The new tax offence will be of concern to banks, accountants, Independent Financial Advisors, and to anyone providing tax advice. Businesses are now eager to know what they should have in place to make sure that employees and others who act on their behalf are not facilitating tax evasion for clients and customers. They will also want to know how they can show that they have taken every reasonable step to prevent the facilitation of tax evasion in the first place. An organisation that is criminalised because of the actions of its employees or third parties will have serious implications for its long-term future and health.

There are some easy first steps that businesses can take to strengthen their position. Policies and procedures in place at present should be reviewed, with an emphasis on explaining to people what is and is not acceptable. These should be updated if it is deemed necessary in clarifying the position. Any procedural improvements should be freely communicated to all employees and others providing tax services for the business.

To understand the wider direction of travel for corporate liability we need to understand why there is a need for change. The historic approach to successfully prosecute a company required the identification of a person in the business who possessed a “directing mind and will” and who, specifically, condoned or was aware of the crime. Known as “the identification doctrine” there are a number of difficulties with applying this approach. For example, it may not be difficult to identify the ‘directing mind’ in a family-owned run business where all of the major decisions are taken by a small group of people. It is quite another for a prosecutor to identify the directing mind within a global business that has a complex structure and sophisticated approach to decision-making.

The new offence follows the same methodology and approach as the Bribery Act.

The UK Government has also been consulting on wider reform of corporate crime. One of the options being given serious consideration is a wider roll-out of the “failure to prevent” approach across the spectrum of economic crime. This will place an onus on a business not only to show that it has done no wrong, but also to demonstrate that the organisation is properly policing its employees and others acting on its behalf. Whilst not quite the end of the presumption of innocence until proven guilty, any firm who allows their employee or connected person to break the law had better have a very good story to tell.

 

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Business, Climate Change, Environment, Global warming, Government, Legal, Politics, Science, Society

Clime, crime and punishment …

(From the archives) Originally posted on August 25, 2008 by markdowe

1.

CLIMATE CHANGE AND REMEDY

THE KYOTO PROTOCOL, a climate change treaty that spanned over a decade in an attempt to reduce greenhouse gas emissions, is perceived by some climate scientists as an ineffective waste of time and energy. The biggest polluters on the earth, the United States and China, both failed in ratifying Kyoto which, had they done so, would have seen a vast improvement in how global warming could have been tackled and managed.

The only effective way in dealing with the threats and risks posed by climate change is through legal enforcement and wider use of the courts. Science appears more than capable in linking climate change as a probable cause of deadly weather events which the world has experienced in recent years – such as the heat-wave that hit Europe during the summer of 2003. If this is the case then global warming becomes a matter for product liability law.

The threat of judicial arguments in an attempt to resolve the scourge of climate change should, if nothing else, force many companies to radically change their behaviour than any government policy ever could.

Pinning individual weather events on climate change

Scientists usually purport that we can’t attribute individual weather events to climate change. But, the example quoted of the 2003 European heat-wave, should have been the first weather event where that link could have been made. That event, particularly within European latitudes, was probably a one-in-a-thousand year event. The immediate effect was a series of anticyclones over Europe. We can’t say those were made more likely by climate change but, what we can say, is that climate change made the background temperatures within which those anticyclones operated that much higher. This, surely, goes central to what the problem is.

Small changes in averages make extreme events much more likely. The 2003 heat-wave was far outside the range of normal climate uncertainty. Scientists and environmentalists say that there is 90% certainty that the risk of such a heat-wave in Europe has at least doubled as a result of climate change. More recent estimates (Myles Allen, University of Oxford) suggest that is probably a four to six-fold increase. The finding of a “doubled risk” is significant because established legal precedent holds that this is the threshold on which civil liability sets in. The argument remains, therefore, that lawyers must have a case against those people and companies who caused and exasperated global warming. In 2003, the heat-wave claimed the lives of 30,000 people. Whilst most who died were older people, fewer than a quarter would have died in the following year. If such a scale of deaths had been due to the toxic effects of a drug or chemical spill, lawyers and the courts would have been swiftly involved. Suing the big oil companies, for the environmental damage and degradation they have caused, seems, now, only a matter of time before such organisations are subpoenaed. Legal redress seems the only rational way forward.

At the time of the European catastrophe, many people blamed the healthcare services for not being prepared. That, too, seems a bit irrational because how many sectors in society can cope with a once-in-a-thousand year event? The real culprits are the 20 or so coal and oil companies that we know have been responsible for 80% of carbon dioxide emissions.

Statute

If the lawyers attempt to go for product liability, then everyone down the supply chain would be liable: the company that sold you the petrol, the oil company that pumped it out of the ground, and the showroom that sold you the car that burnt the fuel. But, if it is said to be an industrial waste issue, then the polluter pays. That might be the car driver.

Previously, actions have already been taken against greenhouse gas polluters under public nuisance and human rights legislation. But, none as yet, has alleged actual harm. That could become a critical moment if proven and, yet, could be over something quite trivial, like someone in Alaska suing an oil company because their conservatory subsided as the permafrost melted. Legal precedent could have huge implications if harm was ever proved but an effective way to tackle and deal with climate change.

Knowing the harm

In order to successfully sue an organisation, you have to show that they knew the ‘harm’ in what they were doing, and went ahead with it anyway. But, the question underpinning causation is, at what point in history did the impacts of climate change become foreseeable? Should it, for instance, be 1896, when Svante Arrhenius first calculated the greenhouse effect? Or, when the Intergovernmental Panel on Climate Change (IPCC) first reported it in 1990? Of course, up until the recent signing of the Climate Change Bill by President Bush, the United States has never accepted climate change as being foreseeable at all. If 1990 is accepted as the start date for ‘foreseeability’, then companies can get away with some of their past emissions. By 2030, more than half of the excess greenhouse gases in the air would have been emitted since 1990. The concept of foreseeability will, therefore, rapidly diminish.

Whilst this approach is very different to that of Kyoto and of national emission targets, the legal route would have much more impact on the use of fossil fuels than any conceivable formula devised by government.

Ironically, though, when government’s started to make attempts in regulating carbon dioxide emissions – as the British Government has done for some time – then the companies producing them are given a defence: that their government had acted, so they didn’t have too. Such an argument, largely, mitigates responsibility.

Pursuing the legal option

Kyoto’s decade-long negotiations over a 2% reduction in emissions by industrialised nations, was hardly an initiative that got very far. The legal option remains a credible and viable alternative particularly as the science can now predict and forecast with some certainty what must be done to prevent further environmental degradation.

Most climate scientists do not like the liability idea. They believe that action on climate change should be a managed and sequential process. It’s certainly true, though, that the law can be unfair and arbitrary in its effects and application. Rich people might get settlements, whilst the poor would not. But, the conventional approach introduces, inherently, its own injustices. Besides, the ultimate goal is, primarily, to cut carbon emissions, not to win compensation or financial recompense.

Just the possibility of legal action would have a big effect. Climate change, if it hasn’t already, would become an even bigger issue at boardroom level. Look, for example, at the impact on share prices when a threat exists of legal action against food companies over obesity. 12-years of climate negotiations have not had the (same) effect as it should have had. The threat of being pursued with legal action and/or enforcement remains the only effective way to enforce company compliance if nations are ever to sustainably reduce carbon emissions. The introduction of an international court, too, seems logical.

Science

We still need to work much harder by showing how greenhouse gases are altering our world. Although climate scientists should be commended for spending large chunks of time and using vast resources in predicting what might happen in a hundred years time, we should also be focussing on helping today’s victims.

Interestingly, a research group headed by Myles Allen (Oxford University), previously, compiled reports of how the weather today would have looked without climate change. The modellers described it as it was, and as it might have been. The American legal community was interested in this research because, in 2000 – the year the reports were compiled – the weather was very dry. Reservoirs emptied and there were ‘brown-outs’: electricity in short supply from hydro sources. Allen’s research models could, yet, become the basis for legal action.


International Court for the Environment…

(From the archives) Originally posted on December 6, 2008 by markdowe

2.

REGULATION & ENFORCEMENT

STEPHEN HOCKMAN, QC, a former chairman of the Bar Council, has called for the establishment of an international court for the environment to punish states that fail to take adequate measures in protecting wildlife and in preventing climate change. Mr. Hockman proposes a body similar to the International Court of Justice in The Hague to be the supreme legal authority on issues regarding the environment.

Underpinning the role of such a body would be to enforce international agreements on cutting greenhouse gas emissions to be set and agreed upon next year. The court would fine national governments or individual companies who fail to take adequate measures in protecting endangered species or through wanton neglect and degradation of the natural environment. Enforcing the “right to a healthy environment” seems the next logical step given the seriousness associated with the long-terms effects of climate change.

The pioneering idea has been presented to an audience of scientists, politicians and public figures at a symposium held at the British library.

Mr. Hockman, a deputy High Court judge, believes that it is imperative now given the threat of climate change for the law to protect the environment.

 

A UN Climate Change Conference recently held in Poznan, Poland, began negotiations that is hoped will lead to a new agreement in replacing the Kyoto protocol in Copenhagen, next year. Developed countries are expected to commit cutting emissions quite drastically, while developing countries will be urged in halting deforestation.

The British Government has agreed in-principle that the concept of an international court will be taken into account when consideration is being made on how to make international agreements on climate change binding.

Mr. Hockman said an international court would be needed to enforce and regulate any agreement, saying: ‘Its remit will be overall climate change and the need for better regulation of carbon emissions but at the same time the implementation and enforcement of international environmental agreements and instruments.’

Whilst the creation of the court would provide an arena and setting in resolving disputes and in providing resolutions between states, the court would also likely be useful for multinational firms by ensuring environmental laws are kept to in every country.

It is believed that the court would uphold a convention on the right to a healthy environment; and by making provision for a higher body within itself, so as individuals or non-governmental organisations could appeal or protest against any environmental injustices.

The primary role of such a court would be in making “declaratory rulings” that, essentially, would be made to influence and embarrass countries into upholding the law. The court would also likely be equipped with powers in fining companies and individual states where breaches of the law are made.

Mr. Hockman added: ‘Of course regulations and sanctions alone cannot deliver a global solution to problems of climate change, but without such components the incentive for individual countries to address those problems – and to achieve solutions that are politically acceptable within their own jurisdictions – will be much reduced.’

It is envisaged that the court would be led by retired judges, climate change experts and other public figures. It would also include, as a central part of its function, a scientific body in considering evidence and by making available any data on the environment.

The creation of an international court on the environment would invariably influence public opinion that in turn would force Governments to take issues associated with the environment seriously. If there are established bodies that can give definitive legal rulings that are accepted as ‘fair and reasonable’ that would likely have its own impact on public opinion.

Environmental campaign groups such as Friends of the Earth have welcomed the idea as it helps and promotes the rights of people to live in a clean and healthy environment.

See also:

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Business, Economic, Government, Politics, Society

Thesis: ‘Globalisation’…

GLOBALISATION: ‘PROBLEM & SOLUTION’

1. THE CRITICS’ VIEW

DEFINITION – Globalisation is defined as the ever-increasing integration of national economies into the global economy through trade and investment rules and privatisation, aided by technological advances. These reduce barriers to trade and investment and in the process reduce democratic controls by nation states and their communities over their economic affairs. The process is driven by the theory of comparative advantage, the goal of international competitiveness and the growth model. It is occurring increasingly at the expense of social, environmental and labour improvements and rising inequality for most of the world.

Or more bluntly:

Globalisation n.1. the process by which governments sign away the rights of their citizens in favour of speculative investors and transnational corporations. 2. The erosion of wages, social welfare standards and environmental regulations for the sake of international trade. 3. the imposition worldwide of a consumer monoculture. Widely but falsely believed to be irreversible. – See also financial meltdown, casino economy, Third World debt and race to the bottom (16th century: from colonialism, via development).

2. THE OFFICIAL VIEW

The former UK Minister for Trade, Richard Caborn, previously said:

…The government remains firmly behind a comprehensive new round of negotiations in the WTO as the best way forward for the UK, for developing countries in particular, and for the world economy as a whole. We are working for a more transparent WTO which promotes sustainable development and fosters the rule of law in international trade. [Richard Caborn MP (1999) Letters to the Editor, The Guardian, 11 October]

WTO = World Trade Organisation

In extracts of a letter to Alan Simpson MP, dated 19 February 1999, Brian Wilson MP, a former minister of trade, wrote:

Trade liberalisation is not the cause of the problem of the world’s economies, but the answer to them.

“By securing better access to overseas markets for producers, by reducing trade barriers, and maintaining and improving the supply of competitively priced goods and services to consumers, trade liberalisation brings widespread welfare benefits and helps to improve the efficiency with which the world’s resources are used. That is why the Government supports the EU’s call for a comprehensive new Round of trade liberalisation, which has already met with support from a number of developed and developing countries.”

Trade and environment:

“Our overall aim is to work towards sustainable development in accordance with the principles set out in the Rio Declaration adopted in 1992. The Government will work to ensure that trade liberalisation contributes to this aim, including action to safeguard the environment and the interests of developing countries. By enabling developing countries to derive more benefits from increased access to overseas markets and to inward investment, we can help them to increase prosperity which in turn has the potential to enable them to raise their standards of environmental and social protection.

…The Government believes that the evidence shows strongly that trade liberalisation is in the best interests of developing countries as well as developed countries. The OECD has found that in the last decade countries which have been more open to trade and investment have achieved twice the average annual growth of more closed economies. This is of particular importance to those countries which need to grow faster to deal with their greater infrastructure and capacity weaknesses.” [Brian Wilson MP, former Minister of Trade]

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