Global Tax Fraud cases International Contractors need to know about

global tax fraud contractors

31st January 2023

The global tax authorities wait for nobody and the past few weeks has presented numerous examples of major businesses and highly successful individuals being taken to task for their alleged non-compliance with international regulatory systems. As we know, working on a contract basis around the world creates many opportunities, but also a significant number of challenges, not least ensuring you remain on the right side of often complex laws and regulations that are normally only available in their domestic language. The introduction of the Criminal Finances Act raised the stakes for professionals and meant that major fines and even prison sentences are a real prospect for those who break tax law. We’ve outlined some of the latest examples of tax rulings for contractors to be aware of, and to take heed of.

Key figure in German ‘cum-ex’ tax evasion scandal jailed for eight years

The Cum-Ex scandal has claimed another victim as lawyer, Hanno Berger has been jailed for eight years for his role as a ‘mastermind’ behind the scheme that took billions of tax revenue away from the German state. Prosecutors found that, between 2007 and 2011, Berger helped investment bankers to swap shares on multiple occasions to collect numerous reimbursements for taxes that had only been paid once. He was convicted on charges of aggravated tax evasion and was ordered to pay back a staggering €13.7m, although the verdict can be appealed. The lawyer had become an adviser to banks, funds and investors and had previously worked as a public official in the German tax administration, so he really should have known better than most. Berger had actually moved to Switzerland and was alleged to be hiding from authorities before his extradition back to Germany in February 2017. He also faces a separate ‘cum-ex’ related charge that is ongoing at the Wiesbaden State Court. There have been dozens of arrests linked to the scandal including other lawyers, bankers, traders and financial advisors with a total of 10 countries being involved in total. German Chancellor Olaf Scholz has also been linked after attending meetings in Hamburg with one of the banks that has already been found to have been involved. This case, even more than most, highlights that size, scale and importance is of no bearing to tax authorities seeking to reclaim the nearly half a trillion dollars that’s lost to tax evasion and fraud every year around the world.

Three Russians citizens found with Cypriot passports charged with tax evasion

Three Russians who received Cypriot residency permits and EU passports are facing charges of evading taxes worth a combined €800m in their home country. They secured the documentation through the now closed ‘Citizenship by Investment’ programme that provided passports, in exchange for a qualifying investment of €2.2m, that was shut down over two years ago after being accused of being a platform for financial crime. Reports suggested it had largely been used by wealthy criminals and money laundering organisations to conceal their wealth in Cyprus, a country that has struggled with a reputation as being somewhat of a tax haven. The three individuals, Roman Alexandrovich, Kazorin Sergeyevits and Karskov Sergeyevits had been accused of being tied to the 1Xbet gambling firm, which they all denied, however it appears that the company has links to Cyprus through an elaborate series of shell companies scattered across the globe. Webpages owned and operated by the company in Canada and Brazil are owned by two Curacao-based business entities, which are in turn managed by two Cyprus registered organisations; Klafkaniro Ltd and Kassifoni Enterprises, according to reports. The charges highlight that even operating – and indeed having citizenship – in other countries does not prevent tax authorities from closing in on those who may be operating in a non-compliant way.

Two Trump Organisation companies are found guilty of tax fraud

And finally, last month a jury in Manhattan found two Trump Organisation companies guilty on multiple charges of tax fraud and of falsifying business records in a 15-year scheme they argued was designed to defraud authorities by failing to report and pay taxes on executive compensation. The Trump Corp. and Trump Payroll Corp were both found guilty on all charges they faced with their parent firm facing fines that could reach $1.61m. The sentencing is due later in January, however the Trump Organisation itself should be safe from being broken up as there is no mechanism within New York law that would allow for this. It does however mean that it may be more challenging for the firm to do business and to secure loans in the future. Donald Trump and his family were not charged however the former President was mentioned repeatedly during the trial and his links to the executive benefits were highlighted. These perks included company-funded homes, car leases and personal expenses with taxes not being paid on any of those that were identified. Manhattan District Attorney, Alvin Bragg commented, “This was a case about greed and cheating. The Trump Corporation and the Trump Payroll Corporation got away with a scheme that awarded high-level executives with lavish perks and compensation while intentionally concealing the benefits from the taxing authorities to avoid paying taxes. Today’s verdict holds these Trump companies accountable for their long-running criminal scheme.” Individuals don’t get much more high-profile than Donald Trump and if his highly paid legal teams can’t escape the clutches of the law, then it’s likely that most individual contractors won’t be able to either. If you’re uncertain about your tax and compliance status when operating overseas then ensure you consult with the experts before landing yourself in significant trouble.

6CATS International is part of WorkwellTM Group

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