6th June 2023
Navigating the choppy waters of international tax regulation can be challenging at the best of times, let alone when these laws are shifting on a regular basis. For recruiters placing talent around the world this creates a difficult situation. They must not only be able to find the right roles for the right person, but they must also be experts in the world of international taxation. Not having this degree of expertise is highly problematic, and with major fines and prison sentences on offer for non-compliance, operating on the right side of the law should be high on recruiters’ priority lists. That’s why we’ve highlighted some of the latest stories from around the world that demonstrate both the ever-changing legal environment and the risks that recruiters face when placing contract specialists internationally.
Nigerian representatives committee indicts oil firms for tax evasion
The Nigerian House of Representatives committee has indicted several oil companies over alleged tax evasion potentially worth millions of pounds and is seeking the prosecution of the Chair of the Federal Inland Revenue Service (FIRS) for failing to recover the outstanding taxes. The Chair, Mamman Nami, refutes these charges and has insisted that the tax agency is investigating and prosecuting several tax offenders. The federal committee has alleged that oil companies sold the same oil to other buyers at full price, while inflating the cost of their Nigerian production operations and under-reporting the volume of oil they produced. The committee report also showed that all the involved oil companies had no Certificate of Acceptance of Fixed Asset (CAFA) as outlined in the Industrial Inspectorate Act and, more broadly, had significantly negatively impacted oil revenues within the country. Nigeria is one of the top ten largest producers of oil globally and is the largest oil producer in Africa. In addition, crude oil and petroleum products are the country’s chief export commodities and account for over 98% of annual exports while being responsible for about 83% of the government’s revenue. The sector also regularly draws talent from around the world and any agencies placing specialists within the Nigerian oil industry should be aware of the greater scrutiny being placed on it in the coming months.
Is Belgium doing enough to fight tax evasion?
A leading Belgian judge believes that the Federal Government is not doing enough to effectively fight tax evasion and needs to ramp up its efforts in order to reclaim lost revenue. Belgium’s federal debt, as of December 2022, amounted to just over €470 billion and, in order to reduce the debt, the Belgian government is relying on taxes collected from the population as well as tackling benefit fraud – including undeclared work, non-payment of contributions and undue receipt of benefits. As a result of these operations, by 2021 the tax authority had reclaimed €342m, however according to the Federal Ministry of Finance nearly €30bn per year is still being hidden from the government and Belgian companies have been accused of sending over €383bn to tax havens in 2020 alone. Michel Claise, the investigating judge in charge of corruption, tax fraud or money laundering cases, believes that the true amount of lost revenue is currently impossible to obtain. “We are far from the figure. The Finance Ministry quotes amounts that are most of the time enrolled and not recovered. This is what we recover from insolvent people.”
To tackle the allegations that not enough is being done, Belgian Finance Minister Vincent Van Peteghem announced in April 2022 that he would launch a second ‘action plan’. The first plan aimed to remove the barriers between the tax authorities, the police and the judiciary, to hire additional investigators, to allow digital payment in all businesses and to modernise cash registers in the hotel and catering industry. The second plan focuses 23 action points on international fraud and complex fraudulent constructions by intensifying data exchange and transparency with the government hoping to recover €1 billion per year in additional tax and social security revenue by 2024. Like Nigeria, Belgium is clearly doubling down on its efforts to tackle tax fraud at all levels meaning agencies placing contractors here should monitor any new legal changes closely.
Could Pakistan be planning to restrict cash transactions beyond certain limits to curb tax fraud?
Pakistan is estimated to lose billions to tax evasion every year which is one of the leading factors behind a major revenue shortfall in the country. As a result, the government is looking at all possible options to generate funds, with one solution potentially involving restricting cash transactions beyond a certain limit from July 1st 2023. It was reported that the Pakistani tax authority is looking into whether this proposal is feasible and whether it will push the population to pay via card or other means which could be better documented. If implemented, all retailers will be required to install Point of Sale machines that accept non-cash transactions. This would represent a major shift for the country and any recruiters operating in Pakistan should, again, monitor developments here closely.
These are just three of the countries currently looking at changes to their domestic tax systems, however numerous nations around the world are also in a similar position to Nigeria, Belgium and Pakistan and are looking at methods to reclaim lost revenue. We recognise that it’s exceptionally challenging to both place specialist talent internationally and to maintain your status as a tax expert, so if you’re in any doubt about your operations and your organisation’s ability to remain compliant then partner with a specialist firm before it’s too late.
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