19th February 2021
One of the challenges of tackling international tax fraud is that it takes place across multiple borders and that can, of course, be hard to police. That’s why a number of international jurisdictions joined forces to better collaborate and share information to clampdown on evasion, creating what is now known as the J5. And this group has been working tirelessly to drive compliance.
The J5: global contractor tax crime fighters
Offshore tax evasion has been a problem for some years, but the need for such a dedicated force became clear after the release of the Panama Papers and the Paradise Papers in 2016 and 2017, respectively.
Since its inception in mid-2018, the J5 (or the Joint Chiefs of Global Tax Enforcement to use its full name) has been quietly working behind the scenes to implement a tax standard that is appropriate for a globally mobile economy. Historically, one of the problems with investigating tax fraud was that a country’s tax authorities only had the jurisdiction to investigate transactions within their own borders. By creating a global network, tax authorities are now able to identify tax-fraud enablers more quickly and with greater ease.
So, who’s in the J5? As the name suggests, there are five members in the group from the UK, Australia, United States, Canada, and the Netherlands. The groups are as follows:
- UK: HM Revenue & Customs (HMRC)
- USA: Internal Revenue Service Criminal Investigation (IRS-CI)
- The Netherlands: Fiscale Inlichtingen- en Opsporingsdienst (FIOD)
- Australia: Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO)
- Canada: Canada Revenue Agency (CRA)
These organisations came together as a direct response to a call from the Organisation for Economic Co-operation and Development (OECD), which asked leading countries to do more to combat tax evasion. The members of the J5 share a common goal: to reduce tax evasion, which they believe has a negative impact on the economic and social interests of the countries that they represent.
Though there had been some links between tax authorities across the world in the past, it was largely ineffective; indeed, in the couple of years that the J5 has been active, they’ve shared more information with one another than they had in the previous decade.
So how do they combat crime? They do so in a number of ways. First and foremost, the key tool they have in their arsenal is the sharing of information. That alone can be highly useful to tax agencies to identify and prosecute fraudulent behaviour. The J5 also:
- Work together to investigate people and organisations that are suspected of tax evasion in any form.
- Analyse and work to combat the threat posed by technology and, in particular, cryptocurrencies and cybercrimes.
- Share methods for gathering intelligence and investigating tax evaders.
- Conduct joint operations and investigations.
What has the J5 achieved so far?
The J5 certainly haven’t wasted any time when it comes to getting their first big win. Last year, the group worked together to put an end to a highly sophisticated scheme run by an organisation that was suspected of aiding tax evasion. Based in Central America, this group was accused of using products and services as part of a money laundering and tax evasion scheme. Though they were based in Central America, they made these products and services available to customers around the world.
As with any operation of this magnitude, the logistics of organising the raid were complicated. The J5 had to work together on a coordinated day of action to organise things such as search warrants, interview, and subpoenas.
To highlight the importance of the J5, we just have to look at how this raid came about. Though there were representatives from each of the countries involved in the raid, the location meant that it was largely a US-based team that led the operation. However, that was only the end of a process that initially began in the Netherlands. The information that kicked off the investigation was actually received by the Netherlands Fiscal Information and Investigation Service (FIOD).
What does the future hold?
The J5 usually meets in person once a year to discuss its operations for the year ahead. Understandably, with the pandemic still raging across the globe, the latest meeting was moved to a virtual environment. The focus of the discussion this time around was cryptocurrencies and the financial technology industry.
Cryptocurrencies, in particular Bitcoin and Ethereum, have become of particular interest to tax authorities over the past few years as they attempt to police the virtual world. Once a relatively small subsector of the financial market, crypto has become more mainstream in recent years.
While the future of crypto and whether it will be adopted on a large scale remains to be seen, tax authorities are currently concerned about the possibilities that the currency offers when it comes to crimes such as money laundering. Crypto can cause problems for tax authorities because transactions are anonymous, and while it isn’t impossible to identify the people who own Bitcoin, it will often require a significant amount of time and work from authorities to investigate.
Global contractor tax concerns: partnering with an expert
So, what does all this mean for you? If you’re a contractor that frequently works in other countries, then it’s really important that you stay fully compliant with your global contractor tax, no matter where in the world you are working. We’ve seen that in the past few years, authorities have begun to crack down on all tax related matters, and there’s every chance that you’ll be investigated for a simple administrative mistake.
Why not contact the expert 6CATS International team today to find out how they can help you?