A tale of two citizens (and a company)

Posted by Christie Malry on February 8, 2012 at 11:44 pm

It won't have escaped your notice that yesterday we celebrated the 200th centenary of the birth of Charles Dickens, generally considered (by Wikipedia at least) to be the greatest novelist of the Victorian era. So who better to use when trying to think of a cheap theme for a blog post, eh?

Citizen one is Paul Chambers. Paul's sorry story has been much better documented elsewhere, such as on Jack of Kent's website. Paul made a joke tweet, which was deemed to be an "indecent, obscene or menacing" message under section 127 of the Communications Act 2003. His appeal at the high court started today. Much of the commentary has suggested that the Crown Prosecution Service was wrong to bring charges against Paul and that, the CPS having done so, the judiciary were wrong to find him guilty. These commentators, it would appear, would prefer a world in which the CPS exercises significant discretion in determining who to prosecute, rather than using their knowledge of the law and assessing evidence to determine whether, in their view, an offence has been committed under the law.

Citizen two is Harry Redknapp. He was also in court today, to hear that he had been found not guilty of tax evasion. Payments which HMRC claimed were employment-related were deemed to be just gifts (on which no tax is due). Many commentators criticised the fact that the case had been brought at all. They pointed to the apparent £8m cost of bringing a case in which the amount of tax recoverable was a mere £189,000. Again, these commentators, it would appear, would prefer a world in which HMRC exercises significant discretion in determining which tax cases to pursue, rather than using their knowledge of the law and assessing evidence to determine whether, in their view, there is a liability under tax law.

The company is Vodafone. Vodafone weren't in court today, so far as I know. But they have been in discussions with HMRC over whether they had avoided tax by the use of a corporate structure that routed certain profits via Luxembourg. HMRC settled with Vodafone due to fears that, if the case were lost, other taxpayers might be able to reclaim tax already paid. The risk seeming too great, HMRC decided to take a little rather than possibly lose a lot. Here, commentators were outraged that HMRC used its discretion to not bring the case. They wanted HMRC to prosecute, even if it led to greater revenue loss, merely to send a strong message to taxpayers that avoidance doesn't pay.

How can we resolve these positions? In Paul's case, it's clear that the law is totally fucking stupid. No amount of discretion by the CPS or the judiciary can get around that. Our politicians need to remove stupid laws from the statute books and sit on their hands when they are tempted to pass new ones. They must take the legislative process seriously and look to their own conscience, rather than the whips office, when determining how to vote. They must take a proper interest in the debates, to ensure that concerns about how laws will work in practice are taken into account. Once a bad law is on the statute books, it's too late. We cannot expect the CPS and judges to make good what our politicians have failed to do.

Yet, in tax issues, a more nuanced approach may be possible. Unlike the CPS, HMRC can weigh up the costs of success with the costs of failure because success means money in the door (for the CPS, "success" means somebody being found liable, which is altogether different). So it can make value judgements as to whether it's worth prosecuting a taxpayer or not. Sometimes it will be better to settle, because the potential impacts on other cases if HMRC loses is too high. Sometimes it will be better to proceed, even if the case costs more to prosecute than it will raise in tax, pour encourager les autres. Showing that HMRC is tenacious can work wonders in encouraging self-motivated compliance.

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