18th October 2023
If your agency places contractors internationally then you will be only too aware of the risks of breaching the varying laws and tax requirements in different countries. That’s why in our latest round-up of tax updates for recruitment agencies from around the world we look at stories from the likes of Romania, Luxembourg and Sri Lanka for agencies to be aware of. Remember, international tax systems wait for no person – or agency – and keeping up to speed with legal changes could make the difference between your firm operating on the right or wrong side of the law.
Romania adopts tax reform amid business concerns
Last month the Romanian government rushed a fiscal reform package through parliament which has divided the business community in the Eastern European nation. The measures aim ‘to combat tax evasion and create a fairer tax system’ and in total amount to a value of approximately €15 billion. Evasion is a major issue in Romania, with estimates suggesting the country loses around €30 billion per year, around 15% of total GDP.
Prime Minister Marcel Ciolacu warned politicians that these losses are no longer sustainable for the domestic economy. He said that “Romania finds itself in a paradoxical situation, with the highest labour taxation in Europe, but among the lowest taxes on capital”. The changes introduce new and increased taxes for large corporations and banks operating in the country and go directly against advice of the Economic and Social Council (CES) which warned that the economy would be damaged.
It’s clear that something needed to change, however the legal measures have proved controversial; According to the president of the Foreign Investors Council (FIC), Daniel Anghel, “the most painful measure is the minimum ‘turnover tax’, which could damage competitiveness and potentially discourage foreign investment”. He also highlighted a 14% decrease in foreign investments in Romania this year, suggesting that some firms have already chosen to step back from the country as a result of the new reform package. If your agency places professionals in Romania then ensure you are aware of the implications of these new measures for your business.
French top court to rule mid-November on UBS’ tax evasion appeal
The French court will rule on an appeal made by UBS against its conviction for tax evasion in 2021 which landed the firm with a €1.8 billion fine. UBS – which acquired Credit Suisse earlier this year – is also involved in a range of other legal issues and regulatory proceedings and saw its shares fall by 8% last week following a report by Bloomberg News suggesting that the US Department of Justice is ‘widening its probe’ into alleged compliance failures that helped Russian clients evade sanctions.
The bank, which was also found guilty of soliciting clients illegally at sporting events and parties in France and for laundering the proceeds of tax evasion, had hoped to see the charges thrown out by the Paris appeals court and has already seen the initial fine of €4.5 billion cut after a first trial in 2019. UBS set aside €6 billion at the start of the financial year to manage its ongoing legal issues, and the extent to which it is being chased by authorities should serve as a warning to other firms about the risks of breaching tax and financial regulations.
IMF says Sri Lanka needs to boost reforms and collect more taxes for its bailout funding package
The International Monetary Fund (IMF) has warned the Sri Lankan government that it has so far failed to make enough progress in boosting tax collections and delivering economic reforms for the International Monetary Fund to release a second tranche of $330 million in the country’s $2.9 billion bailout from bankruptcy. An IMF team visited the country last month and said in a statement that discussions would continue with an agreement on how to keep up the momentum of reforms and to unlock the second wave of funding that was due at the end of this month.
The statement revealed that “despite early signs of stabilisation, full economic recovery is not yet assured. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.”
This is likely to lead to further changes to the Sri Lankan taxation system which are being made to try and improve the country’s financial situation. The country plunged into its worst economic crisis last year, suffering severe shortages and drawing strident protests that led to President Gotabaya Rajapaksa being ousted. The country declared bankruptcy in April 2022 with more than $83 billion in debt — more than half of it owed to foreign creditors.
Tax updates for recruitment agencies
While you might assume that taxation and compliance processes are relatively stable, they are often changed and amended, and failing to keep up to speed with these shifts could lead to your agency being exposed to major risk. If you want to keep operating on the right side of the law, wherever you are placing talent around the world, then ensure you partner with an expert firm.
Speak to our specialist team before it’s too late.
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