Tax fraud dangers for international contractors

tax avoidance international contractors

23rd March 2023

In our round up this week, we take a look at the latest progress being made by a prominent EU independent body in its fight against tax evasion and fraud, as well as an interesting story about the public naming and shaming of individuals in arrears with their tax bills, amongst others. And what our news updates reminds us, is that tax authorities around the world are going after individuals who are committing acts of financial crime and fraud. Both global contractors and the agencies placing them must be aware of the severe penalties if found to be in breach of local tax compliance regulations.

The Milan branch of the European Public Prosecutors Office (EPPO) recently uncovered a huge VAT fraud scheme across several EU countries that had robbed authorities of €40m in tax revenue. This was a highly complex scheme involving entities in Bulgaria, The Netherlands, Poland and Slovakia, which took advantage of European cross-border transaction regulations, to sell computer equipment to shell companies set up in Italy in a bid to save on VAT charges. The investigation revealed that the money from the profits made was laundered across the continent by the criminal gangs.

Following the issuing of a precautionary warrant by the European Delegated Prosecutors Office in Milan, police were able to seize assets and freeze bank accounts. As part of the police sting, wiretapping technology was used to intercept phone calls to help monitor movements. The Italian financial police (‘Guardia di Finanza’) in the cities of Milan, Varese, Bergamo, Sesto San Giovanni and Como were all involved in executing the measures and apprehending individuals. Some 60 searches were carried out in October 2022, which led to six people being arrested as part of the operation.

As reported by the Australian Associated Press, there is an interesting family connection in our next story. Both found guilty by the New South Wales supreme court in March 2023, Lauren Anne and Adam Cranston were the masterminds behind a huge tax fraud and happen to be the children of Michael Cranston, who was Deputy Commissioner of the Australia Tax Office (ATO). Indeed, in yet a further twist, they used his senior position to find out if the ATO was aware of the scheme. While their father has not been found guilty, three other co-conspirators have also been convicted.

The Cranston siblings’ company, the Plutus financial services group – the case became known as the ‘Plutus Payroll’ scandal – was named after the Greek god of abundance and wealth. A very apt name given that the tax they withheld via second tier companies was used to purchase property, fast cars and planes! Lauren Anne Cranston was found guilty in March 2023 of conspiracy to defraud the commonwealth with the intent of spending more than $1m worth of the proceeds. Both siblings had been arrested back in 2017, with the trial having started in April 2022.

The perils of tax evasion for global contractors

The European Court of Human Rights in The Hague, an international court of the Council of Europe, ruled in favour of a 55-year-old Hungarian national. In a rather curious case, the entrepreneur took his own government to court following publication in the Hungary National Tax and Customs Board quarterly list of his personal details as part of a wider group of people who owed taxes, deemed to be “major tax defaulters”.  The individual’s home address was made public one month later when it was picked up by a media outlet from the information included in the list.

The 17 strong panel of judges did not buy the argument that such a move was in the interests of the country’s economic wellbeing, the Grand Chamber stating, “Parliament does not appear to have considered to what extent publication of all the data in question, and in particular the tax debtor’s home address, was necessary”. Furthermore, Hungary was deemed not to have followed the protocol of the EU’s General Data Protection Regulation (GDPR), in which consent must be given first before sharing any personal information and that any personal data must be rendered anonymous.

Some interesting stories, particularly the last one, which for once see a tax authority in the dock! Yet despite this one humiliating blip, our other news snippets once again reveal that tax authorities and financial police are cracking down on tax evasion and money laundering to bring those responsible to justice. The outcomes serve as a stark warning to both global contractors and the recruitment agencies placing them of the serious consequences of any financial wrongdoing.

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