Tax evasion impacts finances and firms’ bottom line

23rd June 2017

The impact of tax evasion has the potential to have a seriously negative effect on organisations. Not only are they chastised as ‘tax dodgers’ – ask Google, Amazon and Starbucks about the effects of ‘tax shaming’ – but it has also been revealed that the act has other significant and long lasting effects.

Tax evasion impacts firms

Major firm, Acacia Mining, has been accused of tax evasion in Tanzania after it was alleged that the organisation was under representing the amount of gold that it exports, thereby depriving the East African country of vitally important royalties and tax payments.

Earlier this month, Tanzania’s President John Maguful commissioned a second presidential committee to conduct a probe into the mining firm and in its presentation of findings last week it revealed that Acacia had under-declared revenues and tax payments over a number of years by tens of billions of US dollars.

Financially damaging

However, the reputational damage and embarrassment felt by the organisation wasn’t the only negative side effect. Firstly it’s likely that Acacia will face a large fine – with the possibility of prison sentences for its senior directors if they’re found personally liable – and secondly its share price plunged upon the news being released, highlighting the true knock-on effects of committing evasion. According to financial commentators, shares in Acacia fell 11.20% to 266.50p in afternoon trading following the announcement.

“The committee has established that Acacia Mining PLC has been conducting its mining business here in Tanzania contrary to the law,” said Nehemiah Osoro, chairman of the committee which audited Acacia’s mineral exports over the past 19 years. It recommended that the organisation repay its outstanding taxes and royalties as well as renegotiating large-scale mineral development agreements. It also suggests the government continue its ban on Acacia from exporting gold concentrate.

Knock on effects

This case highlights that evasion can impact finances far beyond a simple fine. Not only has Acacia Mining’s reputation been affected, it has also lost the rights to export one of its most valuable minerals and the firm has seen its share price plummet once the news was published.

With the net closing in on individuals and agencies committing evasion – and with punishments increasing at a rapid rate – it makes no sense for organisations or individual contractors to take a risk with their tax status. If you’re uncertain about the legality of your firm then get in contact with us before it’s too late.


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