Alan Rajah
I am delighted that GGI International Tax Practice Group (ITPG) has produced this fourth edition of the FYI – International Taxation Newsletter on Voluntary Disclosure on Tax Evasion.
In an era where financial transparency and tax compliance are more critical than ever, voluntary disclosure programmes have become essential tools for fostering trust and integrity in tax systems worldwide. Voluntary disclosure programmes play a pivotal role in enhancing tax compliance and fostering integrity. They provide a valuable opportunity for individuals and businesses to correct past errors, and contribute positively to public trust and fiscal responsibility. This approach underscores the importance of transparency and accountability in our financial systems.
Whether you are a policymaker, tax professional, legal expert or business leader, your role in shaping ethical tax practices is invaluable. In this edition, we are pleased to present insights from GGI ITPG members from around the world, offering a diverse and comprehensive view of how voluntary disclosure is evolving on a global scale.
From policy frameworks to the challenges faced by different countries, this collection highlights the successes, challenges, and future of voluntary disclosure programmes worldwide. Our contributors –renowned tax experts – provide invaluable analyses that shed light on the global movement toward fiscal responsibility and ethical tax practices.
The International Monetary Fund (IMF) has stated that billions of dollars of potential tax revenue remain uncollected each year in many countries around the world due to poor tax system design or weaknesses in tax administration.
Governments worldwide face many challenges in implementing voluntary disclosure programmes (VDPs) to address tax evasion.
Key obstacles include:
Lack of public trust
Many taxpayers are sceptical about VDPs, fearing that disclosure of past non-compliance could lead to penalties, audits, or even legal consequences. If governments fail to ensure confidentiality and fairness, participation rates may remain low.
Balancing leniency and enforcement
Authorities must strike a balance between offering attractive incentives such as reduced penalties, and maintaining strong enforcement against tax evasion. Too much leniency may encourage non-compliance, while excessive penalties may discourage voluntary disclosures.
Cross-border tax evasion and offshore accounts
With globalisation, many tax evaders hide assets in foreign jurisdictions. Governments often struggle to enforce VDPs when taxpayers have undisclosed offshore accounts, especially in countries with strict banking secrecy laws.
Lack of international cooperation
Despite agreements like the Organization for Economic Cooperation and Development (OECD)’s Common Reporting Standard (CRS), not all countries cooperate fully on tax matters. Some tax havens still provide limited financial transparency, making it difficult for governments to track hidden wealth.
Administrative and Resource Constraints
Managing a successful VDP requires significant resources, including trained personnel, digital systems, and legal expertise. Developing countries, in particular, may struggle with limited infrastructure to process disclosures efficiently.
Uncertain legal frameworks
Inconsistent or unclear legal provisions on voluntary disclosure can deter taxpayers from participating. Frequent policy changes or a lack of clear guidelines may create confusion and reduce the effectiveness of VDPs.
Political and public pressure
Governments often face criticism from the public and opposition parties when offering amnesties or reduced penalties to tax evaders. Some view VDPs as rewarding dishonest taxpayers while law-abiding citizens continue to pay their fair share.
Lack of awareness and outreach
Many potential participants remain unaware of VDPs or do not fully understand their benefits. Governments must invest in awareness campaigns to encourage disclosures and ensure transparency about the process.
Technology and digital challenges
With the rise of cryptocurrencies and other digital assets, tracking undeclared income is becoming increasingly complex. Many tax authorities lack the necessary technological tools to detect and verify such assets effectively.
Ensuring long-term compliance
A successful VDP should not only recover lost revenue, it should also encourage long-term tax compliance. Without proper follow-up measures, some taxpayers may return to non-compliant behaviour after taking advantage of the programme.
Despite the challenges faced by governments around the world, several major global companies have been caught in tax evasion scandals over the years. Here are some notable examples:
Apple (Ireland tax case – 2016)
The European Commission ruled that Apple owed EUR 13 billion (USD 14.5 billion) in unpaid taxes to Ireland due to illegal tax benefits. Apple had allegedly used a complex structure to shift profits and avoid paying higher taxes. After years of legal battles, Apple won an appeal in 2020, overturning the ruling. However, in September 2024, the Court of Justice of the European Union ordered Apple to pay the money with interest (so about EUR 14 billion).
Google (France – 2019)
Google agreed to pay EUR 965 million (USD 1.1 billion) in fines and back taxes to France. The French government accused the tech giant of avoiding taxes by routing profits through Ireland. This settlement ended a long-running tax dispute between Google and French authorities.
Amazon (Luxembourg tax case – 2017, 2021)
In 2017, the European Commission ordered Amazon to repay EUR 250 million (USD 295 million) in back taxes to Luxembourg. The EU found that Luxembourg had granted Amazon illegal tax advantages. However, Amazon won an appeal in 2021, with the court ruling in its favour.
Facebook (Italy – 2018)
Facebook agreed to pay EUR 100 million (USD 117 million) in back taxes to Italy. The company was accused of failing to declare profits made in Italy and instead routing them through Ireland.
Microsoft (United States – 2023)
The IRS accused Microsoft of owing nearly USD 29 billion in back taxes. The case involved Microsoft allegedly shifting profits to low-tax jurisdictions. Microsoft disputed the claim and is currently challenging the IRS ruling.
McDonald's (France – 2022)
The fast-food giant agreed to pay EUR 1.25 billion (USD 1.3 billion) to settle a tax dispute in France. Authorities accused McDonald’s of shifting profits to Luxembourg to avoid higher taxes in France.
Starbucks (United Kingdom – 2012)
Investigations revealed that Starbucks had paid almost no corporate tax in the UK for years. The company used legal loopholes to shift profits overseas. Public outrage led Starbucks to voluntarily pay GBP 20 million (USD 26 million) in taxes over two years.
Nike (Netherlands – 2020)
The EU investigated Nike for allegedly avoiding taxes by shifting profits through the Netherlands. The company used complex royalty agreements to reduce its taxable income. In 2021 Nike lost its appeal to the European General Court to halt the EU state aid investigation into its tax arrangements in the Netherlands.
These cases highlight the challenges governments face in tackling corporate tax avoidance and evasion.
This special newsletter issue would not have been possible without contributions from all the GGI ITPG authors whose commitment to financial transparency and responsible tax practices has helped bring these discussions to the forefront, as well as the generous support of our sponsor, Jeff Mowery of Mowery & Schoenfeld LLC. Special thanks also goes to Oliver Biernat of Benefitax, whose vision and dedication to this topic have played a key role in shaping this issue.
Your efforts have enabled us to present a comprehensive publication on voluntary disclosure and its vital role in ensuring a fair and transparent financial system.
We hope this issue serves as an insightful resource and inspires continued dialogue on fostering compliance and accountability worldwide. We encourage you to contact the respective authors if you have any specific question about any particular jurisdiction.
Should you have any questions on this subject, I would be delighted to answer them.
Alan Rajah Responsible Editor & Global Vice Chair of the GGI ITPG
GGI member firmLawrence Grant LLP, Chartered AccountantsLondon, England, UKT: +44 208 861 75 75
Advisory, Auditing & Accounting, Fiduciary & Estate Planning, and Tax
Established in 1969, Lawrence Grant LLP, Chartered Accountants provides audit, accounting, tax, business advisory and cross-border tax advice. They are focused on providing business solutions to clients to enable them to grow their businesses both in the UK and overseas. In an era of digital transformation, the firm offers a selection of cloud and digital software solutions using AI technology.
Alan Rajah joined Lawrence Grant LLP in 1994 and he is involved in all areas of general practice, specialising in cross border tax planning, due diligence, mergers and acquisitions and inheritance tax planning. His client portfolio includes UK and overseas companies and individuals. Alan is the Global Vice Chair of the GGI International Tax Practice Group (ITPG) and a Trustee of British Foundation for International Reconstructive Surgery & Training (BFIRST). Contact Alan.
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