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This Digital Life: A taxing problem for internet privacy

The taxman is using a massive data-mining tool to catch evaders, and that includes snooping on social media accounts. So should we be censoring our online selves or do we have nothing to worry about? Katie Wright finds out.

Posting a photograph of an artfully-arranged plate of food at a posh restaurant is one of social media's greatest joys - or irritations, depending on who you ask - but did you know your #foodporn snap could land you in trouble with the taxman?

That's because HM Revenue & Customs uses a data-driven behemoth to sniff out tax-dodgers.

Called Connect, the new tool has "the capacity to highlight patterns in HMRC's rich reserves of taxpayer and third-party data, allowing us to find anomalies between such things as bank interest, property income and other lifestyle indicators, and a customer's stated tax liability".

An extremely powerful system, Connect uncovers in minutes what a fleet of private investigators beavering away could take weeks to find.

It's aimed at a whole raft of tax avoidance strategies - from errors and legal loopholes to outright fraud - but also uses social media to identify discrepancies and to try and plug the estimated £34bn annual tax-gap.

So, if your Facebook page is an endless parade of expensive-looking holidays, dinners and shopping trips, but you're paying very little tax, the bods at HMRC are going to want to know why. Since its pilot in 2008, the data-mining approach has netted an extra £3bn in tax revenue, part of the reason the tax-gap is steadily declining - it was down 6.4% last year.

But is it really fair to use social media as a barometer for a person's wealth? What if you are taken out for dinner at a new restaurant, but you don't foot the bill?

Or if you snag a designer coat at a cut-price sample sale - could you be penalised for your thriftiness?

In reality, you're probably safe, because nabbing Twitter show-offs isn't Connect's priority.

It's mostly used to target big-time fraudsters, who are hiding businesses, or off-shore accounts, plus it relies on public data (but can demand that companies hand over data if a tax case depends on it).

If anything, though, this social site trawling might have an unintended benefit: it might cause humble braggers - people who post ostensibly self-deprecating statuses just to highlight their lavish lifestyles - to keep schtum.

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