26th June 2023
In our latest round-up of the emerging tax and compliance news for international recruitment agencies to be aware of, we’ve highlighted stories from the likes of the Netherlands, Finland, India, Thailand and more. We recognise that it’s challenging enough doing your day job, let alone doing it whilst also remaining up to speed with the ever-changing world of compliance and regulation, which is why we’ve flagged some of the latest legal shifts for your firm to be aware of.
Eurojust coordinates actions in Netherlands and Finland against dividend fraud and tax evasion
Any regular readers of our blogs will be only too aware of the breadth and scale of the ongoing ‘Cum-Ex’ and ‘Cum-Cum’ scandals which have led to dozens of prosecutions, fines and prison sentences for those found to be involved. In the latest news, Eurojust has supported authorities in the Netherlands and Finland with an operation that led to two suspects being arrested for their alleged involvement in fraud schemes. A joint investigation team (JIT) between Finland, the Netherlands and Germany has also been set up.
The suspects allegedly defrauded the Finnish and Dutch tax authorities of at least €17m by illegally reclaiming dividend tax by using trading structures to commit tax fraud and focus on moving company shares around dividend payment dates. The shares were placed for a short period around the dividend payment day with another party, for example, a foreign bank, with a more advantageous tax position. Via complex structures, tax can be wrongfully claimed back by the perpetrators of the scheme, while keeping the risks of the transactions with the banks or companies to which the shares have been temporarily moved. The scheme, which was allegedly set up by the suspects arrested, utilised banks or other partners in Canada and Dubai to commit tax fraud with dividend payments. Across the board, similar schemes defraud tax authorities in the European Union of billions of euros each year and, as you can see, involve perpetrators from across multiple jurisdictions, although this has not dissuaded authorities from taking significant action.
BBC admits ‘tax evasion’ in India
While the BBC and its role in modern broadcasting is a fairly divisive topic in the UK, overseas, the organisation largely benefits from a positive perception, however, that could be set to change – in India at least – if reports are to be believed. According to an investigation by the Hindustan Times, the BBC has been accused of paying lower levels of tax than it should in the country. Around $4.8m is believed to have been underreported and, despite the BBC making an informal confession via email, it will need to file a revised return for the matter to be resolved. The announcement follows a series of tax surveys that were carried out at BBC offices in both Delhi and Mumbai and led to the Central Board of Direct Taxes saying that “income and profits disclosed by BBC Group entities in India were not commensurate when keeping in mind the scale of their operations”. Despite being one of the largest media organisations in the world, the BBC has not been able to escape investigation and, although it has admitted to its error, it now faces a major fine in order to rectify the mistake, which should act as a warning to other firms operating in India.
Thailand to begin data exchange to fight tax evasion
Thailand is the latest nation to sign up to the Global Forum on Transparency and Exchange of Information for Tax Purposes, a multilateral treaty developed by the Organisation for Economic Co-Operation and Development (OECD) meaning that, as of March this year, 168 countries are signatories. Under the framework, the Revenue Department is required to follow a high standard of international cooperation on tax matters and allow for the exchange of information between countries to enable global tax authorities to utilise the data. This covers a number of different forms of information exchange including details on specific taxpayers or corporations as well as more spontaneous forms of information to help governments and authorities collate better data. For organisations operating here, there will be no significant change to operations, but it does mean that it will now be even more challenging for firms to operate under the gaze of the law and for them to get away with any non-compliant activities.
New income tax law to be hard on evaders while simplifying rules for businesses in Bangladesh
And finally, a new income tax law has been introduced in Bangladesh to be harder on individual tax evaders, whilst also making it simpler for organisations to manage their taxes. However, despite its introduction, firms operating here will still need to adapt to the required changes. The draft Income Tax Law 2023 has taken steps to amend archaic tax laws, making them more user-friendly for end users. Significant changes to the laws mean that wilful evasion or attempts to evade income tax in the future may now lead to individuals being imprisoned with sentences ranging from a minimum of six months to up to five years. New regulations that punish both businesses and individuals for hiding wealth that was earned in the country have also been introduced and could lead to major penalties for those found guilty.
Perhaps most notably for businesses, the new law is designed to remove a lot of complexities from the Bangladeshi tax system. It has been drafted in Bangla, the native language, in order to make it more accessible, although this could prove challenging for agencies operating here without a thorough understanding of the language. These changes are “intended to facilitate better understanding and compliance with the tax laws in Bangladesh”, according to an official. While these legal shifts are designed to aid firms operating in the country, agencies will still need to have a thorough understanding of their potential implications if they are to avoid operating on the wrong side of the law.
As you can see, global tax systems are constantly being re-evaluated and adjusted in order to ensure that firms – wherever they operate – are paying the right levels of tax. Whilst many of these changes may be easy to adapt to, others will not, and with potential punishments seemingly worsening, it’s not worth taking the risk. Speak to our specialist team if you’re at all unsure about your agency’s legal status when operating around the world.
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