6th October 2022
Across the globe tax authorities are closing in on tax evaders and those suspected of breaking internal tax and finance regulations. And while most global organisations will have greater resources to challenge sentences and sanctions than the average contractor, they are not spared from being under the spotlight when it comes to regulatory compliance. Many countries are now looking to claw back revenue lost during the pandemic and are honing in on businesses and individuals suspected of breaking the law. And, since the introduction of the Criminal Finances Act in 2017, directors of agencies placing contractors who act illegally are now themselves at risk of punishment from authorities around the world. We’ve highlighted some of the latest cases from across the globe and outlined what agencies must keep in mind to avoid landing in hot water.
Bangladeshi firms continue to suffer from Chinese tax evasion
Bangladeshi authorities have continued to report continued cases of tax evasion by Beijing-based firms or their subsidiaries in Dhaka and other major cities. The charges are linked to the smuggling of items across borders including cigarettes and alcohol in an attempt to avoid income tax payments. This is the latest in a series of disputes between the two countries which shows no signs of abating. Therefore, any contractors with connections to Chinese firms operating in Bangladesh, and the agencies placing them, should be aware of the increased scrutiny on firms with links to China by domestic authorities and, perhaps more so than ever, ensure they remain compliant.
The downfall and ensuing tax fraud trial of ‘Yoga to the People’
In one of the better known examples outlined earlier this month, the increasingly murky details of the case involving an organisation known as ‘Yoga to the People’ have come to light. The company’s founders have been accused of crimes including tax fraud, which was first reported on when former employees claimed they had been reprimanded for handling and counting any of the ‘donations’ given to the organisation for providing yoga services. These funds amounted to more than $20m, however none of the organisation’s founders filed tax returns for themselves or the business for as long as seven years. They are now all facing trial and are expected to be sentenced later this year.
Armenia plans to ratify agreement against international tax evasion
Armenian tax authorities are reportedly close to ratifying a new agreement in their fight against international tax evasion, according to the country’s Deputy Minister of Finance. The country, which is a member firm of the Base Erosion and Profit Shifting (BEPS) initiative, is agreeing a new agreement with the Organisation for Economic Cooperation and Development (OECD). This is a timely law change for the Eastern European nation which estimates that around 30-40% of its economy’s overall value is lost to tax evasion every year. It appears that the Armenian tax department is cranking up the pressure on evaders and those suspected of tax crimes, so agencies placing specialists here should be on high alert and ensure their contractor compliance is robust and secure.
Switzerland suspends exchange of tax information with Russia
In one of the few occasions of countries withdrawing bilateral tax agreements in recent years, Switzerland is suspending its exchange of tax information with Russia to prevent “inappropriate” use of sensitive information as the war in Ukraine continues. The Swiss Federal Council announced that “due to the unclear and uncertain situation in connection with Russia’s military aggression against Ukraine, there is no guarantee that the sensitive information to be exchanged will not be used inappropriately. Switzerland is reacting in the same way as all European Union member states, the United States, Canada and the United Kingdom”. According to the Swiss Federal Council website and social media channels, the domestic tax authorities exchange information on financial accounts and advance tax rulings ‘in order to increase transparency and prevent cross-border tax evasion’.
Indian High Court to enforce criminalisation for tax evaders
The Lahore High Court in India has confirmed that tax evaders will now face criminalisation and confiscation of proceeds of their crimes. The landmark judgement means that financial criminals will now face significantly tougher punishments than they have historically done. The ruling highlights the increased focus on tax fraud in India. The country currently loses around $10.3bn every year in suspected evasion to multinational corporations alone, and the predicted losses driven by the so-called ‘grey economy’ are expected to be more than double that figure. If you’re placing contractors in India, and particularly in Lahore, it’s worth ensuring that you and the specialists you work with are familiar with the latest changes in the Indian compliance and regulatory world, before it’s too late.
Kenyan authority uncovers major tax fraud case
And finally, the Kenyan Revenue Authority has uncovered a series of major long term tax evasion schemes that will see thousands of businesses face major fines, sanctions and potentially prison sentences for senior directors. The schemes, although varied, largely focused on the creation of invoices for fictitious services to clients where goods were essentially faked for tax purposes. Many of the organisations involved have appeared to go to significant extents to avoid being caught including setting up separate legal entities for apparently identical businesses.
Whether you’re placing contractors in Kenya, Bangladesh, Armenia or anywhere in the world, one thing is clear; tax functions and global compliance and reporting authorities are honing in on tax evaders and the organisations that facilitate them. Operating in multiple jurisdictions can be highly complex and the risk aren’t worth taking. If you’re at all uncertain about your organisation’s compliance status, or that of the contractors you work with, then get in contact with 6CATSPRO for international tax and compliance services you can trust.
6CATSPRO is part of WorkwellTM Group
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