25th November 2022
In recent years, agencies that place contractors around the world have had an array of new challenges to deal with, from the introduction of ‘digital nomad visas’ through to shifting laws and legislations, all in a politically charged, turbulent landscape. However, despite these notable challenges, it’s of vital importance to ensure both your firm, and the individuals you are placing, remain compliant with domestic regulations wherever they are operating. We’ve highlighted some of the latest tax news and legal changes that you need to be aware of in order to avoid your firm being hit with major fines and even prison sentences, in some cases.
Italy turns to AI to find taxes
Italy faces the biggest tax gap in Europe and is turning to artificial intelligence in order to tackle the issue. However, according to a domestic tax official, the country must still overcome a ‘national legacy of tax avoidance’ as well as navigating strict EU data privacy laws. The Italian revenue agency says that it has already identified more than one million cases it has labelled as high-risk this year alone, which has prevented more than €6.8bn in fraud. This follows a move by the Ministry of Economy and Finance to adopt a decree authorising the Italian Revenue Agency to launch a new algorithm that cross references financial data to identify taxpayers at risk of not paying. While this move does sound a little like the technology used in the Tom Cruise film ‘Minority Report’, it has already proven to be successful and could help to close the aforementioned gap in Italian domestic finances. Paolo Valerio Barbantini, deputy director general and head of the taxpayers division of the Italian Revenue Agency, said, “In the last few years the use of technology and digitalisation has proven to be a real game changer.” The VeRa algorithm adopted by the Government compares tax filings, earnings, property records, bank accounts and e-payments to look for discrepancies with many other countries believed to be monitoring Italy’s progress with eyes on potentially adopting similar technology for themselves. Depending on the status of the contractors you are placing, they could fall within the gaze of the AI system, meaning you should take additional care when placing specialists here, particularly if you are unfamiliar with the shifting tax landscape.
OECD tax framework could lead to crypto regulations
According to a recent report, Indian citizens account for nearly 11% of the world’s cryptocurrency transactions with nearly 115m crypto investors spread across the country. However, despite this, the country is yet to adopt its own crypto regulations. This could be about to change following a new framework released by OECD (the CARF – Crypto Asset Reporting Framework) that encompasses the reporting of cryptocurrency transactions and would make it possible for member nations to monitor the cross-border transfer of crypto assets. And, with India joining the Multilateral Competent Authority Agreement on the automatic exchange of financial account information in 2015, it – and a number of other countries – may soon be forced to comply with the framework. CARF was put in place following a request by G-20 nations for a framework for the automatic exchange of crypto-related information between multiple nations and requires individuals and entity customers to identify themselves if they are carrying out any crypto transaction. In addition, the framework would make it mandatory for members to report all transactions happening under their jurisdiction. While the legal changes may take some time to come into effect, any agency placing contractors in the crypto and financial spaces should keep a close eye on this legislation as it could have a major impact on tax regulations in India and beyond.
India launches probe into Chinese carmaker further extending scrutiny of firms operating in the country
The Indian Government has launched an inquiry into MG Motor India Private Ltd over alleged financial irregularities, adding to a growing list of accusations against Chinese firms operating in the country. This particular allegation follows an investigation into the company’s financial statements that highlighted suspicious related-party transactions, alleged tax evasion, under and over-invoicing of bills and other irregularities. While the investigation is reportedly in its early stages, it follows similar cases in other countries, including Bangladesh, where Chinese-linked companies have been accused of financial wrongdoing. The volume of these cases coming forward combined with the significant amount of legislation being introduced in India – and indeed across the world – highlights the renewed focus that governments are placing on tackling tax evasion at a corporate and individual level.
Portugal set to axe its ‘Golden Visa’ scheme
Portugal looks set to scrap its residence-by-investment scheme, known as the ‘golden visa’, according to a statement by Prime Minister Antonio Costa, who explained that the programme had ‘fulfilled its role’ over the decade it has been in place. The scheme targets non-EU nationals and allows them to receive residence rights in return for investments in the local property sector or the economy. Portugal only recently increased the minimum requirements for the programme, meaning that applicants needed at least €1.5m for capital investments, €500,000 for investment funds, €500,000 for property investments and €350,000 for urban renovation schemes. However, the Golden Visa system has been heavily criticised for causing local house prices and rents to soar. Since its inception, Portugal has attracted €6.5bn in investments by foreign nationals, mainly from China, Brazil and South Africa, with most of the money going into property. However, as the scheme is now closing, any agencies placing contractors in Portugal should be alert to any knock-on effects from this shift that could create additional legislative changes.
While maintaining your own organisation’s compliance, it is considerably more challenging to manage the legal burden of the contractors you are placing. As punishments for tax fraud and other crimes can extend to the management and directors of the agencies placing the professionals involved in some countries, it’s definitely not worth taking the risk. If you’re unsure of the status of the agencies you place around the world, get in touch with 6CATSPRO
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