International Contracting & Compliance Update

15 December 2022

With a number of major economies facing challenging times, tax authorities across the world are cracking down on tax evasion and non-compliance. They need to claw back lost revenue.

With the agencies that place professionals now potentially being liable for the actions of those individuals, it’s never been more important to ensure that your business is operating compliantly. Here we highlight some of the latest international cases that you should be aware of if you place international contractors.

Deutsche Bank Frankfurt HQ raided in tax scam probe

German police raided the headquarters of Deutsche Bank last month as part of an ongoing investigation into tax fraud. Prosecutors from Cologne investigated the company’s Frankfurt offices as part of the so-called ‘cum-ex’ case with the bank saying it “continues to cooperate fully” with authorities. First exposed in 2017, the scandal involved numerous participants who swiftly exchanged company shared among themselves around divided days to claim multiple tax rebates on single pay-outs. German authorities have also searched the premises of other top banks such as Barclays, Morgan Stanley and JPMorgan Chase. As these firms are some of the most powerful in the world, this highlights how serious German, and other authorities, are about cracking down on non-compliant behaviour.

Bangladesh to use utilities bills to identify tax evaders

The Bangladeshi tax authorities have announced that they will begin cross checking power and gas usage data of individuals and organisations by partnering with two major utility suppliers in a move designed to identify tax evaders across the country.

Tax evasion by foreign firms in South Korea doubled since 2018

According to a statement from the Korea Customs Service (KCS), foreign businesses operating in South Korea have increasingly engaged in tax evasion, with the amount of unpaid taxes almost doubling between 2018-2021 to around £121m last year. With a renewed focus on ensuring foreign firms and contractors are remaining compliant with South Korean legislation, it’s never been more important to ensure that the professionals you are placing are operating on the right side of the law when working here.

Greek-French deal to avoid double taxation heads to Parliament

The Greek and French authorities have combined to launch a treaty designed to tackle tax evasion and prevent double taxation between the two nations. The treaty was approved in its first reading in the Parliament last month and will be ratified later this year.

Italy turns to AI to find taxes

Italy faces the biggest tax gap in Europe and is turning to artificial intelligence to tackle the issue. 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. 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.

Here to help

It’s fairly easy to see that the global tax and compliance market is only becoming stricter and more challenging to navigate.

Several countries are introducing new legislation designed to catch law-breaking individuals and agencies in an attempt to balance their economies in turbulent times. This means it’s never been more complicated and potentially risky to place contractors around the world. If you need specialist advice on how remain on the right side of the law, find out more about Workwell International or make an appointment with a member of our team.

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