21st December 2021
As we’ve seen with recent deals struck by countries working in association with international bodies such as the Organisation for Economic Development and Cooperation (OECD), clamping down on tax fraud committed by companies and ensuring that tax systems are both fair and transparent, has been a key taxation theme in 2021. And as we learnt in The Pandora Papers, a number of famous politicians, celebrities and footballers to name but some professions were exposed for concealing the economic activity of their shell companies operating in tax havens.
Tax fraud in Spain
One of the most high profile of these cases was none other than King Juan Carlos I of Spain, who is now living in exile in the United Arab Emirates’ second biggest city, Abu Dhabi. The deposed former monarch, who has been under investigation for a number of years regarding his taxes in Spain, was recently cleared by the Swiss Supreme Court and will not have to testify about his alleged involvement in kickbacks relating to the AVE high-speed rail project linking from the holy cities of Mecca to Medina and a payment of $100m he received from the late King Abdullah of Saudi Arabia.
Although as reported in El País, there was insufficient evidence “to link the $100 million payment from Saudi Arabia to Juan Carlos to the decision to award the contract to a Spanish consortium, nor to the fact that the consortium lowered its bid price by 30%”, Geneva’s public prosecutor Yves Bertossa commented in court documents that there was a willingness to conceal the names of recipients and senders of the money. The Swiss bank involved in the dealings, Mirabaud & Cie of Geneva, was fined €48,000 for not reporting two other payments to the Money Laundering Reporting Office (MLRO).
Spain fights tax fraud
That doesn’t quite spell the end of his tax woes, though. The Spanish Supreme Court is also investigating other alleged cases of tax fraud, some relating to the same pre-2014 period when the then king enjoyed his status of immunity. As well as the Saudi scandal, Spanish tax authorities are looking into his involvement and link to trust in Jersey, the largest of the Channel Islands, and his alleged failure to declare income received by a Mexican businessman and friend to cover his and his family’s expenses. Spanish authorities are awaiting further information from Swiss prosecutors.
And if that wasn’t enough on his plate, Juan Carlos I has also been served with a lawsuit by his former lover, Corinna Larsen, with the former monarch and other close associates of his standing accused of alleged harassment, illegal monitoring and libel. Among those mentioned were former Spanish army general Félix Sanz Roldán who served as Director of Spain’s National Intelligence Centre (CNI) for 10 years, from July 2009 to July 2019. According to Larsen, the threats were intended to make her return a $65m gifts paid to her by the former monarch in 2012.
Legal documents also revealed that the Monaco based Larsen, who goes by her aristocratic German-surname Zu Sayn-Wittgenstein, suffered from her mental health as a result, which in turn according to El País, “led to the deterioration of her relationships with her children and other relatives, and the loss of many of her wealthy clients”.
The case of former King Juan Carlos I and his legal battles with the Swiss and Spanish tax authorities, along with those exposed by The Pandora Papers in October 2021 for concealing their wealth in tax havens, highlights yet again that no one can hide from the law. Tax residents and their companies will be investigated by local authorities if suspected of any wrongdoing according to the country’s laws. Recruitment companies placing global contractors must tread very carefully and ensure that they don’t incur any penalties or even face court proceedings. For all contractor compliance, tax, strategy and risk management matters, our 6CATSPRO experts can advise you.