Global tax evasion and why your agency needs to be aware

Global tax evasion

26th September 2022

If your agency places contractors overseas you’ll be only too aware of the significant risks involved when it comes to dealing with unknown and unpredictable regulatory landscapes, and keeping up to date with the latest compliance changes. However, keeping up to speed with this shifting world is critically important and we’ve highlighted some key examples from around the world that show why you must ensure your contractors are compliant wherever they’re operating.


HMRC investigates 600 former Euro Pacific account holders for tax evasion


The domestic tax authority here in the UK is writing to hundreds of former Euro Pacific account holders following the Puerto Rican authorities’ suspension of  the bank’s license on suspicion of global scale tax evasion and money laundering. The suspension follows a two-year investigation backed by the Joint Chiefs of Global Tax Enforcement (J5) international group of tax authorities of Australia, Canada, Netherlands, the UK and the US.


The J5 investigation was triggered by Euro Pacific’s relocation from St Vincent and the Grenadines to Puerto Rico, which investigators believed had been engineered to keep them out of the Common Reporting Standard. The bank has a long and chequered history of being utilised for tax avoidance and evasion purposes, as well as providing a platform for tax abuse by many multinational organisations.


HMRC says it is preparing more criminal investigations into Euro Pacific customers in the UK who decline ‘to do the right thing’ and regularise their tax affairs in response to its letters, according to reports. Despite going to fairly extreme lengths to hide its noncompliance, this case highlights the extent that international authorities will go to in order to crack down on any suspected evasion.


Greek Government using citizen ‘snooper force’ to tackle tax evasion


While the name of this concept might bring to mind ‘The Thick of It’, the introduction of the so-called ‘snooper force’ in Greece is a move designed to crack down on tax evasion in the country and will enable citizens to check whether receipts they’ve received from businesses are genuine or not. The system, applied via a smartphone app will mean that any customer can receive part of the fine that will be imposed on a business as a reward. The ’Appodixi’ (receipt) app allows customers to scan QR codes on receipts and will give them the chance to report the crime anonymously or under their own details. In some cases, the rewards can reach up to 10-times the value of the receipt, with a maximum value of €2000. The measure is not only designed to crack down on evasion, but also to speed up the domestic authority’s prosecution on relevant cases. This is one for agency owners to be aware of and to ensure they flag up both the potential benefits and risks of this upcoming new approach to any contractors they are placing in Greece.


Raids carried across India in tax evasion probe


Over 110 locations across India were raided in a coordinated effort by domestic authorities to crack down on unrecognised political parties (RUPPs) and the false donations received by them. According to the Election Commission of India there are nearly 2,800 RUPPs in India and in June this year it was announced that they were launching court cases against more than 2,100 of the entities for violations relating to false monetary contributions and failing to update contact details of key officers. At least 198 additional RUPPs were struck off after being found as non-existent.  The case highlights the efforts Indian authorities are making to regain lost revenue by cracking down on all tax related matters; if entire political entities aren’t safe, then individual contractors – and by extension the agencies that place them – don’t stand a chance.


Bangladesh accuses Chinese companies of being behind major tax losses


Finally, according to Bangladesh Live News, Bangladeshi authorities have identified multiple cases of tax evasion by Chinese based companies or their subsidiaries in the capital, Dhaka. In one recent example a Beijing registered company, Conda Art Materials Bangladesh Co. Limited, a subsidiary of a larger Chinese firm supposedly imported goods labelled ‘Made in Bangladesh’ directly from China thereby evading huge amounts of tax duty.


Bangladesh has accused richer countries, most notably and regularly China, of evading its tax system, with this move a clear indication that it is ramping up its fight to ensure individuals, businesses and indeed governments pay correct tax rates when required. Other incidents noted by the Bangladeshi authorities involved over 2700 cartons of liquor, which were seized on a major highway in a special operation by authorities, and a case involving a Chinese firm called DG Anti-Fake Company.


Between 2011 and 2021, China invested $10bn in infrastructure in Bangladesh but according to some media reports, Beijing has missed fulfilling the promises on several deals signed during this period. After missing several deadlines, work on a road tunnel project in Bangladesh’s Chittagong district, eventually started in 2020 but will not be completed until 2023, potentially putting the country at risk of an economic crisis caused by its large loan debt.


The announcement of the investigation is part of a wider climate of increasing regulations and legislation in international tax systems in both high and low income countries and an ongoing tit-for-tat in tax cases acting as a proxy for other underlying issues between quarrelling countries. The increasing hostility has already and will continue to lead to increasing pressure on authorities to clamp down on all forms of tax evasion. And since the introduction of the Criminal Finances Act in 2017, it’s not just contractors operating in these challenging environments that could face sanctions for non-compliance, agency owners can too.


With the regulatory landscape changing on a regular basis, it’s highly challenging to stay on top of all new regulations and tax rules. It’s not worth falling into the world of global tax abuse and ending up facing prosecution. Speak to us before you or the contractors your agency places fall into trouble.


6CATSPRO is part of WorkwellTM Group


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