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Press watch: virtual currencies; Thames Water

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US to crack down on virtual currency tax fraud: ‘US officials are targeting virtual currencies due to fears that Americans are using them to evade taxes, opening a new front in the crackdown on tax fraud. Virtual currencies, such as Bitcoin, and the exchanges where they trade, have come under increased scrutiny. Now US authorities have signalled they believe that virtual currencies – which can be traded anonymously – are being used improperly in other ways, including to evade tax.

‘“Clearly the increasing use and misuse of cyber-based currency and payment systems to anonymously transfer illicit funds, as well as hide unreported income from the IRS, is a threat that we are vigorously responding to,” Victor Lessoff of the Internal Revenue Service told the Financial Times. “The globalisation and digitalisation of our currencies is a significant emerging threat ... It doesn’t take much of a leap [to think] that these currencies would be used for tax evasion.” Mr Lessoff said the IRS could demand that taxpayers say whether they are doing any business using non-traditional methods such as using PayPal accounts that allow for the virtual transfer of money.’

Financial Times, 10 June 2013

Thames Water under fire for tax avoidance: ‘Thames Water, Britain’s largest water company, has been accused of “ripping off the taxpayer” after it paid no corporation tax last year, despite making profits of more than half a billion pounds. The company succeeded in cutting its tax bill to zero and was even handed £5m credit from the Treasury by writing off investments against the amount it was due to pay the government.

‘The company’s accounts also show it paid £328.2m interest on “inter-company loans” via a Cayman Islands funding vehicle to pay external bondholders such as pension funds.

‘Thames Water’s finance director, Stuart Siddall, denied that the company was avoiding paying tax: “We have an absolutely clear conscience about everything we are doing. Everything is transparent. We are reviewed by HMRC every year as a major corporation and we are seen as low-risk because our tax is very straightforward. The Cayman Island companies are there purely to comply with UK company law requirements for the acquisition financing structure.”’

The Independent, 11 June 2013