10th October 2023
For agencies placing contractors overseas, the top priority should be remaining compliant with varying international employment and tax laws and regulations. However, to make this task even more challenging than it already is, these laws are shifting and changing all the time, presenting a serious issue for businesses placing specialist contractors around the world. That’s why we’ve highlighted some of the latest legal changes for recruiters to be aware of.
Prominent German banker on trial in giant tax fraud scheme
The so-called ‘Cum-Ex’ scandal rolls on as another top ex-banker went on trial at the end of September after being accused of playing a role in a multibillion-euro German tax fraud scheme. The ploy involved a tactic where banks and investors would swiftly trade shares of companies around their dividend payout day, blurring stock ownership and allowing multiple parties to falsely reclaim tax rebates on dividends. It ran from 2005 to 2012, however a lengthy investigation has taken on vast dimensions as courts and officials try to hold wrongdoers to account and claw back an estimated 10 billion euros ($10.66 billion) lost from government coffers. This specific trial involves Christian Olearius, the 81-year-old former CEO and chair of the Hamburg-based bank M.M. Warburg and the most senior banker yet to stand trial. He has denied any wrongdoing but made no statement in court on Monday as prosecutors claim damages of almost €280 million. Earlier this year, a tax lawyer alleged to have masterminded the fraud received a second eight-year jail sentence, the longest to date.
Others, including a former employee of Warburg Group and two British bankers, have also received sentences and fines. The case is still rolling on, however agencies placing professionals in Germany and indeed a number of other European nations, should be aware of the increased spotlight now placed on any non-compliance in these regions.
Hungary seizes $1 million in crypto assets citing tax evasion
The National Tax and Customs Authority (NAV) in Hungary has seized crypto assets worth over £800,000 from a local group as a result of ongoing tax evasion, according to local reports. The Authority raided 28 locations in one day with three arrests being made as the group is suspected of evading taxes worth around £7 million. It allegedly operates within the consumer electronics trade, and acquired devices tax-free from the EU before selling them through front companies in order to avoid paying taxes. Hungary has gone through a series of proposals related to the ongoing management and legislation of cryptocurrencies, with the governor of the central bank, Gyorgy Matolcsy suggesting there should be a blanket ban in place on all crypto trading and mining as a result of its potential links to illegal groups. The debate still rages on; however, this move highlights the risk that anyone operating in the crypto space is facing when operating in this part of the world.
High-profile celebrities fined for tax evasion in China
To China now where local authorities have fined a number of high-profile celebrities as a result of tax evasion. Yuan Bingyan, a film and television actress who graduated from the prestigious Shanghai Theatre Academy, was fined almost 3 million yuan (c.£300,000) by tax authorities in Chongqing as a result of evading and failing to make overdue tax payments. Ms Bingyan’s company, Chongqing Liyan Culture Media Co was separately ordered to pay a 1.32 million yuan fine for unpaid taxes and other penalties. This is part of a wider move by taxation authorities that have pledged to step up supervision on the entertainment industry
In addition, “gossip” live streamer Wu Chuan was forced to repay a total of 13.6 million yuan, the taxation administration said in a separate statement. Wu, who broadcasts on short-video platform Douyu and can attract as many as 600,000 viewers, had dodged tax and resisted investigation into his finances. Better known on the platform by his alias “Soul Knife God”, Chuan evaded 8.27 million yuan in personal income tax between 2018 and 2021 through methods such as concealing earnings or fabricating the nature of some of his income, it said. Both Bingyan and Chuan are among a growing group of wealthy entertainers who have faced major fines over income tax evasion in recent years as China works to combat high incomes as part of the national drive to promote common prosperity. While the moves to target entertainers are designed to alert the rest of the population to the risks of evading taxes, they also highlight a growing crackdown on any non-compliance with domestic legislation as China looks to tackle wider economic problems. Agencies placing professionals here will recognise how challenging the regulatory landscape is and should be aware of even greater levels of scrutiny on individuals and agencies than there has been in the past.
Nigeria losing huge funds to tax evasion and illicit trades says ICPC Chair
And finally, in Nigeria the chair of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), has admitted that the country is losing huge amounts to tax evasion every year and needs to step up its efforts to clamp down on illegal activity. Professor Bolaji Owasanoye revealed that tax evasion, trade mis-invoicing and ‘abusive transfer pricing’ were the three main sources of lost finances in a meeting in Abuja last month. He outlined how these activities were leading to ‘a denial of opportunity for economic progress’, highlighting how an oil license, granted in 1998 and with the potential to produce over $1.3 billion in output, has produced nothing as a result of ongoing financial and legislative challenges.
Professor Owasanoye said the domestic government was working hard to find methods to clamp down on illegal activity and would be placing greater scrutiny on all areas of its economy in the coming years. Agencies that have placed specialists in Nigeria will likely be aware of the challenges of operating in Africa’s largest country by population, however, this warning by the ICPC Chair could introduce new changes to an already problematic system.
If you place specialists in contract roles around the world, it’s well worth ensuring that you are keeping pace with the never-ending series of legal and regulatory changes taking place. With fines and even prison sentences at risk for agency directors who do not act compliantly, it’s simply not worth taking the risk. If you’re unsure about your legislative status, or that of the professionals your agency is placing, then speak to a specialist firm before it’s too late.
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