12th August 2021
Global authorities are clamping down on tax evasion using longer prison sentences and stricter financial penalties as a deterrent. For recruitment agencies, the tax risks can be huge. Placing contractors internationally presents challenges to stay compliant with rules within specific countries. Over the past few months, we’ve seen changes in the approach of governments to crackdown on tax avoidance schemes.
Here are the most recent development’s from across the globe to help recruitment agencies stay up-to-date.
Longer prison sentences being imposed for tax evasion crimes
HMRC’s Offshore, Corporate and Wealthy (OCW) Unit have trebled the prison time for secured tax evasion convictions this year compared to last. The OCW Unit is turning away from civil penalties, such as fines and instead focusing on using targeted criminal investigations. Prison time is seen as a powerful deterrent for high net worth and ultra-high net worth individuals along with having a more direct impact on offenders.
“Prison sentences are the most powerful weapon in HMRC’s arsenal, they impact not just on the evader but their families who have to live with the consequences of convictions, and often tax assessments and confiscation proceedings.” Andrew Sackey, partner at law firm Pinsent Masons explained.
Research also found that the average length for a tax evasion prison sentence had increased again. Last year it stood at 2 years 11 months, in 2015/16 it was just over 2 years.
Singer Shakira likely to face court for alleged tax evasion
After a three-year investigation, Spanish authorities have found there is sufficient evidence to bring Shakira to trial for evading a €14.5 million tax bill. In the court document, Judge Jesús Juberías found that “Shakira Isabel Mebarak Ripoll stopped paying taxes in Spain during the years 2012, 2013 and 2014, even though she had a duty to do so as her tax residence was here.” Shakira has refuted these claims, insisting that she lived in the Bahamas during that period, a country where there is no income tax.
Spanish law states that a person qualifies as a tax resident if they spend 183 days in the country. Despite absences due to work throughout that period, Shakira returned “home” to Barcelona at the end of each trip.
Shakira will only be able to avoid trial for tax evasion if she can come to a deal with the Spanish public prosecutor.
Tax fraud mining executive bailed in South Australia
The Australian Federal Police have charged Bob Johnson, a mining industry executive, with tax fraud worth over $38 million. Johnson appeared last week at the Adelaide Magistrates Court and was granted bail. Both the Australian Taxation Office and the Australian Criminal Intelligence Commission were involved in the investigation. Along with agencies from the UK, USA, Jersey and the British Virgin Islands.
Johnson faces a maximum of a 10-year prison sentence for each of his charges – two counts of defrauding the commonwealth and 13 counts of obtaining financial advantage by deception. He will return to court later in the year.
Key ruling made for German tax evasion
Two British traders hoping to appeal their conviction have been dismissed by Germany’s Federal Court of Justice. The key ruling on the legality of “cum-ex” transactions marks one of the biggest tax scandals in the country’s history. A €14 million fine for one of the traders along with a ruling for the private bank MM Warburg to repay €176 million were upheld by the court.
Using a loophole, the traders tricked the German government by receiving millions in multiple tax reimbursements despite only paying tax once between 2005 and 2011. The practice is alleged to have existed since the early 1990s, with the loophole closed in 2012.
Avoid tax risks for your recruitment agency
These latest developments show that when it comes to tax avoidance schemes, no one can hide from the law. That’s why it’s so important for recruitment agencies to minimise their tax risks by seeking expert guidance to help them stay compliant. Global appointments will be subject to different rules and legislation, particularly when using third party suppliers. The latest developments show that the risks are getting higher and underline the need for caution and expert advice.
Speak to our team of experts for advice on the legislation you need to know to keep your recruitment agency and contractors safe.