22nd June 2023
As you’ll know only too well, placing specialist contractors in countries around the world can be a challenging – and potentially risky – business. Navigating tax legislation in foreign languages requires an expert ability and that’s before we factor in the introduction of new laws and regulations that agencies must keep up to speed with. That’s why we’ve looked at some of the latest stories and potential legal shifts from around the world to ensure staffing firms avoid major fines and even prison sentences in some cases.
Central figure in German tax evasion scandal convicted in 2nd case
In Germany a key figure in an ongoing tax evasion scandal was convinced and sentenced to more than eight years in prison, marking the second verdict against him in the past few months. Wiesbaden state court handed out the significant sentence to former tax inspector turned legal tax expert, Hanno Berger for three counts of tax evasion as well as confiscating nearly $1.2m of his assets. Berger has been involved in the ‘Cum-Ex’ scandal which ran between 2006 and 2008 and led to unwarranted tax rebates of 113m and involved investment bankers swapping shares to collect multiple dividend pay-outs for taxes that had only been paid once. The scandal has led to a number of subsequent legal cases and is expected to lead to further prison sentences for those involved. It highlights the extent to which authorities in Germany, and other countries, are willing to go in order to clamp down on non-compliance in any form and should act as a warning to firms operating here.
France to use spies and wire-tapping to track down tax evaders
France is another country that’s clearly not to be crossed if recent reports are anything to go by as the country is seeking to create a fiscal tax intelligence service to root out those suspected of defrauding the tax authorities. According to Public Accounts Minister, Gabriel Attal, “Our priority is to make the ultra-rich and the multinationals who commit fraud pay what they owe.” The newly formed service will recruit human sources for financial firms and will pay them to source information on any non-compliant activity using methods like wiretapping. It will focus specifically on firms leveraging situations where auditing tools are impended, like funds being hidden in tax havens and through opaque trust models. The government plans to train 100 ‘elite agents’ by 2027 with many coming from existing tax services, while the number of audits will increase by 25% with a greater focus on larger firms and estates. In addition, there are also plans in place to make incitement to tax fraud a legal offence and to sentence individuals who share or sell tax evasion tips up to three years in prison. While many countries talk a good game, this move by the French government highlights just how seriously it is tackling tax evaders both at an individual and corporate level.
Crackdown on a Lithuanian criminal network involved in large-scale food fraud and tax evasion
Meanwhile, in Lithuania, a joint operation by domestic authorities working with other government groups from Estonia, France and Germany, has dismantled an organised crime group suspected of large-scale VAT fraud. The investigation has led to the arrests of 24 suspects and included 70 searches and inspections of warehouses and other property. The group is believed to have purchased millions of expired food products and other goods before altering the expiry dates and reselling them to the Lithuanian market. They are suspected of obtaining over 1m through the activity after allegedly keeping fake accounting records to hide the real values and to avoid paying taxes. The joint action shown to tackle this group should highlight to organisations what authorities are willing to do in order to crack down on any suspected illegal activity, even if it is taking place across different jurisdictions.
Banks in the Netherlands still not doing enough to fight tax avoidance
And finally, according to a new study by the Fair Bank Guide, the majority of Dutch banks are still not doing enough to tackle tax avoidance by business customers. Five of the eight firms studied scored poorly on tax avoidance including ABN Amro, ING, and Rabobank, with the authors of the report suggesting that they do not ask companies they finance to be open about tax payments and agreements with other authorities. While these findings suggest that banks could do more to tackle evasion and avoidance, it’s highly likely that they will also drive all Dutch banks to ramp up their compliance efforts in order to tackle firms acting illegally. Agencies operating in the Netherlands should therefore be alert to any new legislative changes and increased anti-evasion and avoidance pressure in the coming months.
While these stories highlight a selection of some of the major cases from recent weeks, there are dozens of other examples of authorities stepping up pressure on any individual or organisation suspected of non-compliance. If your firm places talent overseas and is at all uncertain about its legal position then ensure you speak to an expert before it’s too late.
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