27 June 2023
Dear 50 International,
Born in Denmark in AD 994, King Canute became King of England in 1016. Canute the Great ruled through effective governance based on the rule of law and was one of our more notable non-domiciled residents.
By legend, King Canute’s court proclaimed him to be above heaven itself. To prove them wrong, he sat enthroned before a rising tide. Here he commanded the sea to turn back. As the sea lapped over his robes he showed his courtiers that the King was not above God.
Whilst his throne and footsteps succumbed to the tide, today’s non-domiciled residents can be misled into believing that the tide of time, travel and the complexities of international living will wash away their tax footprints. Today’s tide is, however, electronic and its ebbs and flows form a permanent record never to be expunged. If anything, the footsteps of transactions are increasingly transparent and cross-referenced.
As noted in ‘Walls of Glass’ and ‘Five Eyes’ it is important to be reminded of the need to recognise the ever-rising tide of digitally enhanced tax-based tracking. To acknowledge his accountability to the laws of nature, Canute surrendered his gold crown on an altar; never wearing it again. Likewise, taxpayers need to surrender lax tax habits and thinking. More prudent still is the need to have one’s tax footprints carefully checked, and corrections legitimately made.
Be reminded that in 2019 the OECD reported that some 40 Tax Administrations were in the process of using Artificial Intelligence. HMRC's ‘Connect System’ now holds 55bn items of taxpayers' data as it focuses on the difference between the tax payable, and the amount actually collected; currently a negative £32billion per annum. HMRC, as with all tax authorities, is under pressure to deliver efficiencies and revenue.
HMRC introduced its ‘Connect System’ in 2010 to narrow this gap by using data to identify potential tax evasion and avoidance by selecting individuals and businesses for investigation. The aim is to speed up the process of detecting fraud and tax evasion by cross-referencing businesses and people's tax records with other databases. Here Connect looks at property ownership, overseas bank and investment accounts and correlates bank and credit card statements, DVLA records, and social media posts as well as checking browsing histories and email records. HMRC’s exponentially growing data trove is also being mined on an internationally cooperative basis.
Some chroniclers record King Canute seated on the shore of Thorney Island being the site of his palace. Now known as the Palace of Westminster, today it is the home of our lawmakers. Westminster was an island then and to some it still is! Rather apt in a way, as it is here in today’s palace that the legislation is passed to harvest domicile and non-domicile digital footprints.
Not unlike archaeologists finding fossilized early footsteps, our digital tax footprints are likewise there for all time!
All the best,
Alistdair