A tax evaders' amnesty

Adapted from a letter to the Institute.

It is my proposition that some form of economic amnesty be declared by government, so that the 'black economy' can find its way back into the legitimate economic mainstream, without the fear of penalty from the Inland Revenue, or the criminal law, for those declaring their ill-gotten gains. Such money would, however, be subjected to taxation at the appropriate rate thenceforth. At present, huge sums of revenue are lost to the Exchequer and Customs and Excise every year, and economic statistics become ever more unreliable

The amnesty will not be by any means a regular occurrence - it would be a one-off, lasting perhaps a month. The strength of such an amnesty would be the fact of its one-offness - there would be no guarantee that it would ever happen again, so there would be no point in planning for it.

Most people claim to abhor crimes of violence, yet there has been little or no fuss about the existence of weapons amnesties in the past. Would there, I wonder, be such a fuss about an economic amnesty which would demonstrably benefit the community through improved government revenues, along with the removal of disincentives to continue with what may be a life of crime?

Response from the Inland Revenue

Evidence from other tax administrations which have experimented with amnesties, is that they are not particularly effective. Determined evaders will ignore an amnesty unless they believe that it will be followed by a detection and enforcement regime more rigorous than that which preceded it [Ed: or by significantly lower tax rates]. Amnesties can be seen as unfair, not only on those taxpayers who always pay their taxes fully and on time, but also on those evaders caught and penalised under the normal regime.

M. A. Bravery, Inland Revenue Business Profits Division, Somerset House, London WC2R 1LB (tel 071 438 7181).