Tax evasion in France scrutinised more than ever with record fine

tax evasion in France

5th March 2019

It’s clear that authorities worldwide are striving to introduce stricter tax and compliance systems. The latest news illustrating this comes out of France, a country that has undoubtedly been taking a leading role in this movement of late. We have previously written about the destination’s role in pushing for tax to be introduced to digital giants such as Amazon and Netflix, and the French authorities’ admission to using social media to catch out tax evaders. In the latest news, a French court has ordered UBS to pay €4.5bn in what many are calling a landmark tax fraud case. This is not only limited to tax evasion in France, and the sheer size of this fine demonstrates just how seriously countries are taking non-compliance. If multinational brands are finding themselves on the wrong side of the law in the global crackdown on evasion, then all organisations, regardless of size, are certainly at risk. This means that recruitment agencies certainly need to ensure they are fully compliant when placing contractors overseas in order to avoid punishment. So, what’s the latest?

Tax evasion in France: UBS fine

According to reports, a court in Paris found that the bank had illegally helped French clients hide billions of euros from French tax authorities between 2004 and 2012, with the court allegedly receiving evidence that UBS had provided services to conceal such fraudulent funds. Overall, France’s national financial crimes unit estimates around €10bn went unreported to tax authorities. UBS strongly contested any criminal wrongdoing, with the Swiss bank stating that it “strongly disagrees with the verdict” and plans to appeal, suggesting that “the conviction is not supported by any concrete evidence, but instead is based on the unfounded allegations of former employees.’’

The firm further claimed that the ruling was based on prejudices in France against Swiss tax practices, which are known to be lax. It insisted that the bank was only ever offering “legitimate and standard services under Swiss law.’ However, this explanation fell on deaf ears, and the court ordered record fines of €3.7bn for UBS’ Swiss head office, €15m for its French subsidiary, and civil damages of €800m. Five former UBS executives were also given fines and suspended prison sentences.

A global affair

This is not the first time UBS has been targeted by international authorities for non-compliance. UBS also accepted large fines after cases in both the USA in 2009, and Germany in 2014. However, the accumulated $2.5 billion spent on settling numerous past scandals pales into comparison with the $4.5 billion fine given out for just one case, showing the seriousness of the offence and the keenness of authorities to mete out harsh punishments.

This reflects a wider crackdown on tax evasion in France, and shady banking practices across the whole of Europe. Two years ago, the country introduced a US-style settlement procedure intended to help financial prosecutors take on a more global role. Société Générale negotiated with the PNF last year to pay £250m to end a bribery case. HSBC also settled a tax probe in 2017 for £300m, which was the largest criminal fine in France.

Agencies need to pay attention

Clearly, tax evasion in France, and indeed the rest of the world, is becoming more heavily scrutinised. With the introduction of the Common Reporting Standard and the ease with which countries can now share information, it is undoubtedly more crucial than it’s ever been to make sure that your firm doesn’t fall foul of the law. With the complexity of international compliance laws, the speed with which jurisdictions can exchange information, and the willingness of authorities to prosecute, the chance of being punished for simple carelessness has increased sharply. Any discrepancies from your firm or the contractors that you place abroad could cause serious trouble. For this reason, we advise that firms seek out the help of an expert contractor management service that can take the weight of international compliance off your shoulders, and allow you to purely focus on your job – making as many quality placements as possible.


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