International recruitment agency compliance

10th November 2023

Barely a week goes by without at least some changes being proposed for tax systems in countries around the world. For the majority, these legal shifts will have no impact on day-to-day life, but for directors of hiring firms, staying up to speed with legislative amends should be a top priority. We’ve highlighted some of the latest stories that impact international recruitment agency compliance and show how your organisation can stay on the right side of the law, wherever you are placing talent.

Lenovo under investigation for alleged tax evasion

Regular readers of our blogs will note the sheer number of truly global organisations that are under investigation for breaching tax law. Computer giant, Lenovo is the latest to fall under the spotlight as the firm faces probes in India for alleged tax evasion. Sources in the know of the development told CNBC-TV18 that “intelligence agencies including Directorate of Revenue Intelligence (DRI), Directorate General of GST Intelligence (DGGI) and Income Tax department are conducting probe over alleged tax evasion by laptop companies.”

The investigation is based on alleged “evasion on account of flouting country of origin norms, not making enough value addition in terms of respective FTAs, evasion via under-valuation of computers and peripherals. GST wing alleges that evasion is also on account of under-valuation of products which are sold in the market,” according to local sources. On September 27^th, the income-tax department conducted searches at Lenovo’s Indian offices which also covered some of its supplier firms and a more detailed investigation is expected to follow.

EU adds to tax haven blacklist

Last month the European Union (EU) added Antigua, Barbuda, Belize and The Seychelles to its blacklist of alleged tax havens following a decision taken by finance ministers in Luxembourg. They also voted to remove the British Virgin Islands, Costa Rica and the Marshall Islands from the list of nations that have been accused of providing non-cooperative tax jurisdictions following their decision to accept changes to their legal frameworks.

The blacklist network was created following several scandals including the ‘Panama Papers’ and ‘LuxLeaks’ with sanctions extending to the freezing of European funds. In total, the list covers 16 jurisdictions including the likes of Fiji, Guam, Panama, Russia, Trinidad & Tobago and Vanuatu.

However, some commentators have suggested that blacklisting countries does not have the desired impact, with Oxfam highlighting that it leaves out several zero-tax nations like the British Virgin Islands. Agencies are advised to keep an eye on the blacklist as attempting to operate here compliantly could create numerous additional challenges.

EU raises security concerns over sale of ‘golden passports’

The EU has raised security concerns over the trade of “golden passports” and has vowed to tighten visa controls after revealing that five Caribbean nations have sold citizenship to 88,000 individuals from countries including Iran, Russia and China.

A report by the European Commission highlighted the true scale of the illicit passport trade. One such example is Dominica, an island with a population of just over 70,000, which has apparently issued over 34,500 passports, more than four times the total previously disclosed by Dominica’s government.

In addition, St Kitts and Nevis, with a population of 48,000, has issued 36,700 passports, twice as many as estimated in 2018.The sale of passports in Dominica climbed dramatically after 2015 when citizens of a number of Caribbean states were given permission to travel to most EU member states for 90 days a year without a visa. A proposal to overhaul the regulations has been suggested, with the Commission saying it is concerned that golden passports could be enabling the “infiltration of organised crime, money laundering, tax evasion and corruption”. It wants the power to suspend visa exemption for countries that sell citizenship to buyers who do not have a “genuine link” to the country.

Sri Lanka says it has reached an agreement with China’s EXIM Bank on debt

Our final story from this week comes from a country that has regularly appeared in this blog – Sri Lanka. The Southern Asian state has faced major economic problems in recent years, but has announced that it has reached an agreement with the Exim Bank of China to restructure its debt. This is a key step to unlocking a second instalment of a $2.9 billion rescue package from the International Monetary Fund.

The Sri Lankan Finance Ministry said last month that the wider agreement covers $4.2 billion in outstanding debt and will support the country as it strives to boost its ailing economy. According to the statement, “The Sri Lankan authorities hope that this landmark achievement will provide an anchor to their ongoing engagement with the official creditor committee and commercial creditors, including the bondholders.”

Authorities hope that this financing will form the basis of the debt restructuring program and facilitate approval of the next tranche of IMF financing of approximately US$334 million. Agencies that place talent in Sri Lanka are advised to monitor further developments in the country as the economic situation has the potential to evolve, or unravel, at a significant pace. Sri Lanka has faced a number of issues driven by a combination of climate challenges and expensive borrowing, amongst other factors.