8th May 2019
As authorities worldwide seek to identify and prosecute tax evasion, we’re seeing an interesting trend emerge: increased support for whistle-blowers. The latest development in this regard is a new EU directive aimed at giving protection to those who expose crimes such as tax fraud. Recently, we wrote about proposed plans by the EU to create an environment where more people can come forward to expose corruption. Now, the EU has pushed forward with these plans, and ratified whistle-blower legislation that will come into force across the bloc with immediate effect. For the many recruiters seeking to place contractors in one of the 28 member states, then, an awareness of this continuing crackdown on tax evasion is crucial. So, what’s the latest?
EU ratifies whistle-blower legislation
The newly approved whistle-blower legislation will shield informants from retaliation, creating “safe channels” for reporting wrongdoing. This is a significant shift away from the previous rules on whistle-blowers, which had been left in the hands of member states, resulting in vastly different approaches from country to country. The changes were received overwhelming well, with the EU ratifying the whistle-blower legislation with a vote of 591 for and 29 against. The law has been praised as giving a “high level of protection’’ to those who come forward. Furthermore, if no appropriate action is taken by authorities, whistle-blowers are permitted by the legislation to make a public disclosure – including speaking to the media. The law covers whistle-blowers against dismissal, demotion and several other forms of punishment. Finally, national authorities will also be required to train officials in how to deal with whistle-blowers.
Why was it introduced?
The legislation was introduced in order to recognise the “key role” that whistle-blowers play in preventing breaches of EU law and protecting society, after the release of the Panama Papers and Paradise Papers. According to European Commission Vice President Frans Timmermans, “potential whistle-blowers are often discouraged from reporting their concerns or suspicions for fear of retaliation. This law will help tackle fraud, corruption, corporate tax avoidance and damage to people’s health and the environment.’’
What has changed?
Laws on whistleblowing were previously handled by the individual member states, resulting in major differences in legislation across the bloc. In fact, the European Commission stated that just 10 members – France, Hungary, Ireland, Italy, Lithuania, Malta, the Netherlands, Slovakia, Sweden and the UK – had a “comprehensive law” in place protecting whistle-blowers. Luxembourg and Ireland, well known tax havens, wanted tax matters to be excluded from the new legislation, but this was rejected.
Boost in EU whistle-blower protection: a larger trend?
However, as the EU ratifies the latest whistle-blower legislation, it is important to remember that this is part of a wider trend of increased support for whistle-blowers. For instance, in August 2018, Switzerland’s Federal Court in Lausanne ruled that the FTA (Federal Tax Administration) would co-operate with Indian authorities in tax evasion inquiries based on data stolen by the well-known HSBC whistle-blower, Hervé Falciani. In addition to this, in the UK, HMRC revealed that the number of calls to its tax fraud hotline doubled last year, with authorities paying out £343,500 for tip offs between 2017-18.
Recruiters beware
As the EU ratifies the latest whistle-blower legislation, this development demonstrates no shortcuts will be taken in the fight against tax evasion. Much like other international initiatives such as the Common Reporting Standard, this move will aid international bodies in tracking down and prosecuting criminals. If you’re a recruiter wishing to place contractors abroad, it’s vital that compliance comes top of your priority list. Countries around the world are becoming so strict on tax and compliance that there is no room for errors. For this reason, we recommend seeking out expert help. Contact us today: