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What are the actual chances of getting caught?

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EthankFink

New member
Hi guys,

I just have a blunt question: what are the chances of getting caught underreporting/not reporting one’s taxes in EU countries?

I know it sounds pretty stupid to ask, and I am expecting most people will say that it’s not advisable and that “one day you’ll get caught”, but realistically what are the chances?

The reason I am asking is because it seems impossible to measure the risk since on one hand some people will say that you’ll get caught one day or another, and on the other hand I have personally witnessed people conceding income from tax authorities in developed European countries (Germany, France) and get away with it (some people doing it for 7-10years).

I am not talking big money here but rather low 6 figure incomes and I am just curious to see if you guys had any tangible feedback on this topic.

Thanks
 
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Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
Chances are actually very very low in terms of being caught . In fact close to zero. However it all depends on whether you earn in the digital or physical cash economy. In physical cash economy under reporting is the norm as it is difficult to track and prove. For those in digital ecommerce environment digital footprints are left.

Seriously it would be very difficult to bust someone for under reporting in cash economy. How do you bust Jackie the hairdresser for example for under reporting unless you do a sting operation? Or Ali the kebab shop owner?

The share amount of SME's fiddling the books often for decades will never be caught until they ban cash :oops:.
 

Sols

Mentor Group Gold
The risks are low enough that I completely understand why some people do it. But it's a matter of peace of mind. I'd rather pay tax (through a well-structured setup with the lowest possible tax burden permitted by law) and know my affairs are in order, than have the constant stress of never knowing if today is the day or if this is the fiscal year when everything unfolds. What's 5%-12.50% tax compared to the repercussions of being caught dodging taxes?

With CRS, FATCA, and variations thereof, exchange of information is increasingly automated. As soon as you have an account with a bank or you are a beneficiary on an account (you own a company that has a corporate account), you might as well assume that your home country will know about it.

But CRS is still new and many tax authorities and financial intelligence units don't have the resources to go through them all. I believe it's only a matter of time before more and more jurisdictions start to automate this process.

As we move more and more towards this form of automation, increased KYC/compliance (even for cash and crypto), and reduction of cash, if secrecy and illegal tax evasions aren't dead already, they are fading away.

Seriously it would be very difficult to bust someone for under reporting in cash economy. How do you bust Jackie the hairdresser for example for under reporting unless you do a sting operation? Or Ali the kebab shop owner?
I don't think they're necessarily that hard to bust. I think the main thing keeping hairdressers and kebab shop owners safe is lack of enforcement due to low priority.

In some jurisdictions, there's even reverse burden of proof for tax evasion or money laundering, so the tax man can for example just ask them to provide proof that they earn as much as they do and compare it to their lifestyle. If the evidence doesn't prove innocence, guilt is presumed.
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
I don't think they're necessarily that hard to bust. I think the main thing keeping hairdressers and kebab shop owners safe is lack of enforcement due to low priority.

It's nearly impossible to police a cash economy. The share amount of SME's in the physical cash economy is mind boggling. The resources that would be needed outside tip offs is not viable for the taxman. Cash can go unrecorded so getting caught is very low.

In some jurisdictions, there's even reverse burden of proof for tax evasion or money laundering, so the tax man can for example just ask them to provide proof that they earn as much as they do and compare it to their lifestyle. If the evidence doesn't prove innocence, guilt is presumed.

Some immigrants plead poverty in EU but build mansions back home in Africa, India, Pakistan or Turkey of their small businesses. Theres nothing to be found looking at their lifestyle in Europe and its unlikely to find their hidden lifestyle abroad unless they post on FB and IG....lol.
 

hernanday

Entrepreneur
It's nearly impossible to police a cash economy. The share amount of SME's in the physical cash economy is mind boggling. The resources that would be needed outside tip offs is not viable for the taxman. Cash can go unrecorded so getting caught is very low.



Some immigrants plead poverty in EU but build mansions back home in Africa, India, Pakistan or Turkey of their small businesses. Theres nothing to be found looking at their lifestyle in Europe and its unlikely to find their hidden lifestyle abroad unless they post on FB and IG....lol.
Uh, ever heard of forensic accountant and al capone?
As the other poster had mention, many jurisidictions have a REVERSE ONUS, you must prove you did not evade taxes, you must prove where all your money came from with receipts and statements from banks, etc.

The gov't uses sophisticated software to find these people, its just muhammad the street kabab man is a low enforcement priority. They much rather target khalil who owns 4-5 kabab shops who is the one building mansions in pakistan.

The forensic accountant will look at all you assets and compare it to income. So Khalil, you reported only $15k income and all your businesses claim losses for the last 5 years, you have a nice big house in London, and the numbers show you can't pay for any of this. Khalil must now explain where the money came from or he will lose everything.
 

polonieth

Active Member
Uh, ever heard of forensic accountant and al capone?
As the other poster had mention, many jurisidictions have a REVERSE ONUS, you must prove you did not evade taxes, you must prove where all your money came from with receipts and statements from banks, etc.

The gov't uses sophisticated software to find these people, its just muhammad the street kabab man is a low enforcement priority. They much rather target khalil who owns 4-5 kabab shops who is the one building mansions in pakistan.

The forensic accountant will look at all you assets and compare it to income. So Khalil, you reported only $15k income and all your businesses claim losses for the last 5 years, you have a nice big house in London, and the numbers show you can't pay for any of this. Khalil must now explain where the money came from or he will lose everything.
Your example of Khalil is more a case for the National Crime Agency, not HMRC.

I agree with @Martin Everson. What sophisticated software is the government going to use for Dave the Gardener who gets paid for 50% of jobs in cash which he uses to pay for his weekly shopping, a few pints and the rest goes under his mattress? Cash in some countries is still so widespread (thankfully) that is impossible to police, it's constantly moving from person to person.
 

EthankFink

New member
Thanks for the answer guys, it's very informative to have your thoughts on the subject.

I am asking because I have always wondered if tax authorities automatically check your tax statements (manually or automatically) or if they'll randomly check your statements.

I know several people around me who generate digital income and declare 0 earned during the year even though they'll have pocketed 50/75k during the year, and nothing ever happens to them.

I am wondering whether banks automatically report your statements at the end of the year, and if those statements don't match with your tax returns you'll automatically be in trouble OR if it takes an actual team of physical tax representatives to randomly check for you to get busted.
 

maxmmm

Mentor Group Gold
Actually Mohammed the kebab seller now makes of his kebab sales online on food delivery services, so all his revenue is tracked and reported in real time.
Also I've heard of several cases where they send people to make a purchase from restaurant, kebab shop, and if they don't get a receipt (or they get a receipt which doesn't match the official cash register) the owner gets a huge 6 figure fine (you stole 10 EUR per hour multiplied by 10 hours per day multiplied by 8 years of business operating = ..).
It's like with terrorists - You need to be on your guard all the time but the tax man only need to catch you ONCE for you to get raped.. Not worth it, but it's understandable the risk is indeed very low.
 

hernanday

Entrepreneur
Your example of Khalil is more a case for the National Crime Agency, not HMRC.

I agree with @Martin Everson. What sophisticated software is the government going to use for Dave the Gardener who gets paid for 50% of jobs in cash which he uses to pay for his weekly shopping, a few pints and the rest goes under his mattress? Cash in some countries is still so widespread (thankfully) that is impossible to police, it's constantly moving from person to person.
Once they scrutinize his file. It just takes one slip up. It could be random inspection of his file. It could be he books a trip to Mallorca and gets stopped at the airport in the UK carrying $5000 in cash and gets referred. It could be one of the people he paid in cash, angry he did a shit job, and they call the Revenuers on him to save their own ass. It could be someone he did work for exaggerating the amount they spend to get more back in sales taxes or exaggerate up their expenses to reduce their taxes. Could be his bitch ex wife or side chick who knows about his mattress money and rats him out because he got caught cheating. A good 35% of people get caught by cops for their exes turning them in.

They don't track your cash, they track your provable spending. Its going to be hard to prove this for some kebab cart vender because they aren't ducking a whole of cash. But once the sums get bigger... anyone whose ever kept a large stash of cash knows its just not comfortable, you feel paranoid bringing a plumber into your house.
 

Sols

Mentor Group Gold
I know several people around me who generate digital income and declare 0 earned during the year even though they'll have pocketed 50/75k during the year, and nothing ever happens to them.
Those aren't amounts worth spending manual resources on, unless the case is made really simple for the authorities.

I am wondering whether banks automatically report your statements at the end of the year,
Under CRS, they do. You can find some banks that don't report but they are decreasing in number as more countries sign up for CRS. Countries that haven't are largely underdeveloped countries you probably wouldn't want to keep money in anyway.

and if those statements don't match with your tax returns you'll automatically be in trouble OR if it takes an actual team of physical tax representatives to randomly check for you to get busted.
The degree of automation varies, but will only increase.
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
Uh, ever heard of forensic accountant and al capone?

Ali the Kebab shop owner is no Al capone....lol. :rolleyes:. How can you even make a comparison like that....lol.

As the other poster had mention, many jurisidictions have a REVERSE ONUS, you must prove you did not evade taxes, you must prove where all your money came from with receipts and statements from banks, etc.

Prove what? The physical cash is not even banked, declared, documented anywhere electronically when taken from customer. How are authorities supposed to know about it in the first place. An audit will reveal nothing unless you invest time and money in surveillance (impossible with number of SME's) or receive tip offs...lol.

The forensic accountant will look at all you assets and compare it to income. So Khalil, you reported only $15k income and all your businesses claim losses for the last 5 years, you have a nice big house in London, and the numbers show you can't pay for any of this. Khalil must now explain where the money came from or he will lose everything.

Abdul doesn't spend money in west like that. He sends most back home often via Hawala system to build homes etc and keep them in family members name. He leads a life of "business is not good today sir no customers come in my shop" You got zero chance of finding out in the cash economy..lol.
 

Martin Everson

Offshore Retiree
Mentor Group Gold
Elite Member
Once they scrutinize his file. It just takes one slip up. It could be random inspection of his file. It could be he books a trip to Mallorca and gets stopped at the airport in the UK carrying $5000 in cash and gets referred. It could be one of the people he paid in cash, angry he did a shit job, and they call the Revenuers on him to save their own ass. It could be someone he did work for exaggerating the amount they spend to get more back in sales taxes or exaggerate up their expenses to reduce their taxes. Could be his bitch ex wife or side chick who knows about his mattress money and rats him out because he got caught cheating. A good 35% of people get caught by cops for their exes turning them in.

Like I said yesterday tip off's is biggest crime fighting tool. But it's just not workable for taxman to track even 0.1% of evaders. Unless your a rapper on IG holding a stack of banknotes up to your ear like a telephone and filed no tax return in last few years.
 

Dasboot

Active Member
It depends a lot on not only jurisdiction, but also the systems & ideology/culture.

This will be a long post I just realised, as I do have quite some experience in "dodging bullets" both for myself and from discussing with close contacts. Useful for myself to sum it up right now too!

Norway:

1. The functionaries are completely incompetent muppets guided by idelogy. They would never manage to get anything going on their own, and will always be suspicious of anyone making it. This is key, but why?

Through the past decades there have been VERY few cases where the state has won & actually got something back from resourceful people fighting back. The case against one of the shipping magnates stretched 4 or 5 decades as far as I remember.

The ideology is one of pulling productive people down, the history of resentment and control goes back to well before the second world war. There used to be a very vibrant economy, but now the state controls almost ALL of the economy (66% in official statistics!)

How should one then handle issues in Norway?

When the digital gulag got started around a decade ago I got into a very interesting situation.

After filing digitally AND getting the receipt for doing so, of course I did nothing more - it was filed after all.

Then, a couple of months later I got a letter claiming I had NOT filed... Of course I called the muppets right away, and the tax authorities told me that I had 4 weeks to file again on paper.

This was unfortunately before I started recording ALL calls with any authority, but even then I did not trust them at all. So I called the register entity that managed the digital portal itself: same answer, 4 weeks.

So I booked my trip to Spain as planned, returning with a full week to simply file on paper again what I had already filed. I thought...

It was 3 weeks that was the deadline... And the trolls had just sent me an insane bill that did not reflect my real situation at ALL...

What to do then...?

Carefully craft a letter based on all of the above was the answer. I politely pointed out that I HAD filed, included a screenshot of the receipt.

Then I added that I understand that they might have problems the first year, bla bla blah...

When it came to the bill I started off by stating that OF COURSE I am not against paying taxes!

BUT, on the other hand, I find it too much to pay a huge bill for something that was an error and which was not my fault.

Cannot remember how long I had to wait for the answer, but what I got in return was a very interesting letter... Which kinda proved that these leeches at least try to feel better about their existence by putting some effort into what they write!

What they sent me was a very carefully crafted letter, in a style that would fit inter-governmental affairs better than dealing with a tiny hiccup.

Each main paragraph was tied to laws and regulations that were quoted back to me. The key here was that I had given some higher-up muppet all the arguments for NOT just harassing me based on their own ineptness.

The conclusion was a sentence so long, convoluted and grammatically complex that even after reading it several times I could not figure out if they had "forgiven" me or not... And I'm normally not someone who has problems reading complex stuff, I even enjoyed some Heidegger ages ago!

Of course they'd never do this if they wanted to hunt me down, so I concluded that it was OK.

Why did it work?

I started out by wilfully setting my own opinions of the useless muppets aside, then assumed that they are not evil on a personal basis after all - and then gave them all the right arguments IN THE RIGHT IDEOLOGICAL FORMAT.

This totally works in Norway, I've helped another contact through a bankruptcy this way, and also has another friend who has dodged a HUGE bill since the eighties.

I also know people running naughty clubs based on manipulating the association entity type. NO bureaucrat would even dare touch an association that suddenly could defend itself by "being harassed" in any way ;-)

Will this work in the future?

Although I've now made it OUT of the digital gulag of Norway & have more freedom here in Thailand, I now need to get a tighter strategy and operation for the fully automated gulag...

After setting up several companies the past 15 years in Norway I do have some very serious medical papers. The past 5 years I was deeply into the welfare system with one of the companies, both for workers we got subsidies for and for myself - I have a serious medical condition that I've been fighting for 30 years this autumn. (Dealing with the medical muppets on top of all this nearly finished me off)

So, this will be my "weapon" if I ever run into any problems with them again - and I plan to use 2020 for ALL transfers and hiding of assets in a way that ties in with me "falling out of the system" in 2019.

At present I'm not sure if I'll appeal the obvious fraud that the state has performed to cut me off. An appeal would be a valuable paper later to prove that I'm "one of the worthy ones" and not an evil, rich businessman...

The drag is that this mentality and insane systems kills ANY initiative, independence and ability to rebuild! I'll spend the next weeks here as a gold member to finally get a GOOD plan going ;-)

Then we come to the next chapter, which is completely different.

Thailand:

Before the scamdemic I had just set up a local company in Thailand as a subsidiary. 2020 then killed off ALL workable revenue streams for me, and left me with a complex and potentially huge visa problem...

The solution in the end was to pay an agent to get me onto a retirement visa, mainly because I could not go on with all this impossible, convoluted problems - I was NOT productive in any capacity any longer.

Now I'll come to the main problem: even though I've been coming and going for a decade and know the culture better than most I have NO idea on how to handle this on my own...

The lawyers want an obscene sum to deregister of course, and I have no idea if some leech somewhere suddenly will send me a huge bill. Its even almost impossible to explain how to play these systems to my wife that tries to help out, but is clueless - she's never even paid taxes here as she works in an embassy haha!

I'll find a way even so, and hopefully won't get totally robbed on the way. Even though I do not know the culture I should be able to handle it somehow, AND learn a lot in the process.

Will I get a tax bill here that is based on pure speculation? I do NOT think so. The culture is completely different, its a basic fact that the state is FAR less powerful - and the norm is getting away with most things.

I've already fled the West here using my last resources, and even though I do not know how it will play out I still feel relatively calm. A way through this jungle will appear, and in the meantime I'm using crypto exchanges here + ATMs to move most of my assets from Norway into gold lying in my safe ;-)

Adapting to the culture as well as learning all the ropes can be done by just following the flow, being too late, filing wrong things, faking stuff and maybe eventually paying a modest bribe is how it is done.

That being said I'll probably get around to using lawyers and other types of leeches the next weeks to get the beast under control. I might even be able to convert it to a holding company in the meantime, give it away or sell it - or even get it signed onto someone else for a modest payment ;-)

Then I'll start chipping away on the worst problem...

Norway AND Thailand:

Where do I legally belong? Should I file for a move formally, or just blame it all on 2020 if a problem comes up? Should I let Norway think I'm an obedient citizen sitting in my room scared of the world while Thailand thinks I'm a retiree here?

Should I get into the insane and indecent, very intrusive process of getting marriage papers from Norway, or just stay single on paper?

Will Norway eventually start pressuring their owned sheep back home to "the best country in the World", after just sending out insane tax bills to anyone not fitting in?

I do hope my gold & silver goes up a LOT at the same time as a second passport will drop a lot in price... Right now I'd have to spend ALL assets to get one. Which I would totally do if I was 25 again!

The indecency of it all:

This is what provokes me the most. When I was completely ripped off in 98 for unemployment benefits I simply skipped paying ANY taxes for a couple of years. Looking back this was one of the few periods that I could just WORK and get on with it, without being dragged down!

I've had such problems getting through it all in the digital, ideological hellhole that Norway has gone through that most people would not get close to even understanding half a percent... You have to experience it, its the coming digital gulag of all of the West!

Even though I saw the contours of this 15-20 years ago I still tried to DO something, including setting up a Norwegian branch of a mid-size webdevelopment company based in Europe. I slept in a storage area in my shared studio for 2 years, during which I once visited the ER close by - but eventually left because I was not able to wait...

Looking back I see that a major factor in draining all of my personal resources was the combination of digitalisation and ideology. Which at least has not come as far here in Thailand.

I'm still struggling to find the correct "stance" here in Thailand before getting on with dismantling the company. Playing the victim card here does NOT work, even when its real - so I guess I'll try to pin it all on "the virus"...

At least I have a plan! :) And that plan has a clear goal: to get OFF the map of all these incompetent leeches!
 

KJK

Entrepreneur
Oh and I thought Norway is the dream country everyone aspires to be, everyone is basically a millionaire thanks to the national oil pension fund, right?
Or maybe I'm missing the other stuff like 45% tax burden, publicly available tax records, social justice warriors in Barnevernet, and all sorts of other weird things. The only good thing is probably not being member of the EU and not using the euro.

Seems to be a trend now, in the past it was a few billionaires here and there fleeing - like the shipping magnate Fredriksen renouncing Norwegian citizenship and becoming Cypriot. Now it is even middle class and various companies. You notice that in the US as well - Joe Rogan, Elon Musk, Oracle - all of them fleeing California to Texas.

In some jurisdictions, there's even reverse burden of proof for tax evasion or money laundering, so the tax man can for example just ask them to provide proof that they earn as much as they do and compare it to their lifestyle. If the evidence doesn't prove innocence, guilt is presumed.
This is not an "wow, it's even reverse" situation. This is a standard situation in 90%+ of countries I imagine. In criminal proceedings presumption of innocence should apply (unless you're North Korea). In civil and administrative proceedings presumption of guilt applies.

The reason I am asking is because it seems impossible to measure the risk since on one hand some people will say that you’ll get caught one day or another, and on the other hand I have personally witnessed people conceding income from tax authorities in developed European countries (Germany, France) and get away with it (some people doing it for 7-10years). I am not talking big money here but rather low 6 figure incomes and I am just curious to see if you guys had any tangible feedback on this topic.

Anyways the question of the OP goes down to the actual enforceability of a law. There are intellectual property rights but how will they be enforced when I download a Netflix series via Bittorrent? There is a law that I can't transfer 10k abroad without declaring, how will that be enforced when I take crypto with me? There are absurd laws related to Covid-19 right now, from wearing face masks in forests to shutting down restaurants, how long will countries try to enforce this before people start operating speakeasies just like in the 1920s?

It is the same with taxes - noone, literally noone pays taxes e.g. in Greece and Italy if they have even the slightest opportunity not to do so. Extremely easy if you worked in tourism on an island (now of course you got hit with covid), very easy if you're a digital nomad, still easy if you're a corporation that can hire a big-4 consultant to find a good structure for you. Not possible if you're a state employee or even just a regular employee in a corporation.

I am wondering whether banks automatically report your statements at the end of the year, and if those statements don't match with your tax returns you'll automatically be in trouble OR if it takes an actual team of physical tax representatives to randomly check for you to get busted.
Not all transactions / incoming transfers qualify as income. If the "tax representatives" (I have doubts if that is the correct term lol...) had to go after every person with high turnover on the account, they would go crazy and be ineffective. There is a higher chance they will be triggered by your ex-wife, envious neighbour or some shady activity associated with you.

I am asking because I have always wondered if tax authorities automatically check your tax statements (manually or automatically) or if they'll randomly check your statements.
The goal, at least for now, is not to check everyone's income and all their accounts and all transfers to the last cent. The goal of the heavily taxed countries is to keep the system running and people compliant and scared as much as possible. That is why the tax office is actually MORE likely to go after moms dropshipping stuff on local eBay without licence and without paying taxes - rather than going after a digital nomad with a higher turnover.

Someone following the flag theory is a much more difficult target - even with stuff like spying and CRS. At the very least live in country other than your citizenship, have company in country other than where you live - then add additional stuff like good banking, good company structure, perhaps second citizenship if that helps you. Be two steps ahead - then there will be thousands of much easier targets than you. And as the saying goes - you don't need to be faster than the lion, you just need to be faster than the other zebra.
 

heliotrope

New member
I am asking because I have always wondered if tax authorities automatically check your tax statements (manually or automatically) or if they'll randomly check your statements.
You can bet that they will use the increased information sharing and lower cost of machine learning to optimise this in future, in ways none of us can guess at the moment. And they have many years to go back. There will still be human intervention to see if the algorithm has bubbled something up that is worth looking at, but anomalies won't rely on spot checks, they will be automatically flagged, and the algorithms will improve and become more sophisticated with more data and more detection.
 

Dasboot

Active Member
You can bet that they will use the increased information sharing and lower cost of machine learning to optimise this in future, in ways none of us can guess at the moment. And they have many years to go back. There will still be human intervention to see if the algorithm has bubbled something up that is worth looking at, but anomalies won't rely on spot checks, they will be automatically flagged, and the algorithms will improve and become more sophisticated with more data and more detection.
Yup, we're definitely all in the digital gulag now...

Which kinda proves me right, I started going cash & ditched most bills in my own name almost a decade ago - as well as keeping sums transferred/withdrawn small, and evenly spread out ;-)

All I've got as real assets is precious metals and Bitcoin/cryptos, good luck trying to get any substantial payment out of me even if I get flagged!

But of course I'll prefer to avoid any hassle, which is why I'm here now actively for a few weeks...
 

4br

New member
In the UK there are about 3,500 cases brought against alleged tax evaders per year; and there is an estimated £70b of evaded revenue per year, which accounts for 3.5% of GDP or about 8% of the budget.

If we divvy that £70b up between them we get a grand total of £20,000,000 per person, while the average income in the UK is about 0.12% of that £20m.

So you are looking at maybe 1 in 500 chance per year. That gets a bit slim over a lifetime.

The bods do things like stake out restaurants and count how many people go in the restaurant. Then next year they sting the books for that day's account to see if they roughly add up. From what I've read the main targets are hairdressers, plumbers and restaurateurs.

In Eastern Europe tax evasion is rife and there is little the government can do about it.
 
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Dasboot

Active Member
In Norway the leeches take notes of registration plates outside malls, and then extort you if you DARE use the company car to stop & do some shopping on the way back home from a job............

The insanity of it all is endless, and of course the huge scope of what they try to control makes it dead easy to hide in the big data ;-)

But of course they end up killing ALL real businesses, leaving the corps & the state to run the whole show...

Corpocommunism? I've been searching for a while for the right term!
 
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