tax evasion – Croatia, the War, and the Future

Bit Of Croatia In Big Panama Papers

April 6, 2016 by inavukic 35 Comments

Photo: Screenshot “Pirates of the Caribbean” movie
Jack Sparrow ( Johnny Depp):
“Take what you can,
give nothing back”

Jack Sparrow’s words (from the movie “Pirates of the Caribbean”) “Take what you can, give nothing back” seems to have the been the motto dished out equally by an enormous number of world’s leaders or distinguished persons regardless of the fact that these leaders are engaged in conflicts between each other, have wide or opposing ideological differences and place barriers against each other in the world. Seems they are no different to common villains, crooks and thieves and what truly irritates is that they, for instance, drive on the roads built with tax payments they contribute zero to, their kids attend schools tax income contribute to but their companies’ contribute zero to, etc.
How else could one look at the astonishing and shocking revelation by the German Suddeutscher Zeitung newspaper that leaked Sunday 3 April 2016 the so-called Panama Papers, containing millions of documents and data as to how some of the world’s most powerful have been hiding money in offshore accounts in order to avoid paying tax in their own countries or countries where profit from business is made or business owners reside in…

Panama Papers “list” contains the names of relatives and associates of former and current heads of state and government from at least 35 countries, from Angola, to Iceland, the United Kingdom, France, Italy, Austria, Croatia, Hungary, Serbia, Montenegro, Ukraine, Spain, Syria, Israel, Saudi Arabia, China, India, Pakistan, Japan, Argentina … It was only in 2013 at the G8 summit in Northern Ireland when the British Prime Minister said: “We need to shine a spotlight on who owns what and where money is really flowing.” He promised, with fellow world leaders, to fight the “scourge of tax evasion and aggressive tax avoidance”. Such behaviour was no longer acceptable, he said and now in 2016 his late father Ian Cameron is named on the list of Panama Papers, i.e. holding offshore companies to be involved in tax evasion…Cameron will argue he personally had no benefit from his father’s offshore companies but the question does remain whether it’s acceptable to have a leader of a government who stems from a family that engaged in tax evasion however legal that taxation evasion set-up might have been? The leaked Panama documents reportedly show how Ian Cameron employed dozens of people in the Bahamas to sign off on matters relating to his company Blairmore Holdings Inc., which managed tens of millions of pounds of assets. The company is based in the Bahamas but was incorporated in Panama, where it has been a longstanding client of the law firm at the centre of the controversy, Mossack Fonseca.

The world’s spotlight is now being shone on the extraordinary client base of Panamanian-based Mossack Fonseca (MF), the world’s fourth largest offshore law firm. A yearlong study by more than 370 journalists from 109 media organisations in 76 countries of a leak from MF of 11.5 million documents has shed new light on a secret world awash with cash salted away from prying eyes. Much of it, if not most, is concealed perfectly legally we are told, but under the sort of tax “efficient” arrangements mostly associated with the very rich, and by, among others, a clatter of politicians who would rather continue to pretend to their citizens that they are of modest means, says the Irish Times.

Photo credit: ICIJ
International Consortium of
Investigative Journalists
VISIT: https://panamapapers.icij.org/

In this underworld of big money and power capitalism is mobile and morality appears tedious. In the world of global capitalism money knows no boundaries, and the wealthy make the laws. Limits and laws are only for the poor, the average and the stupid, it transpires. Refugees disturb us because they are visible. Tax Refugees do not concern us, because they are powerful enough to disappear and stay out of sight. The West, which is so proud of its values, is closing down its borders to the persecuted people in search of a better life, but readily accepts dirty money in search of a better place to invest.

The real owners of this sea of wealth unveiled via the Panama Papers, much lodged in tax havens like the British Virgin Islands, are carefully hidden behind nominees and bearer bonds. But by tracking contacts and associates, 12 national leaders have been identified so far, who through immediate family or crony circles, are involved in the beneficial ownership of offshore companies created by MF. These include Russia’s president Vladimir Putin; China’s president Zi Jinping (and eight current or former members of the party politburo); Pakistan’s prime minister Nawaz Sharif; Ukraine’s president Petro Poroshenko; and Iceland’s prime minister Sigmundur Davíd Gunnlaugsson (resigned position due to Panama Papers scandal on 5 April)…new names to emerge any day now as leaked documents are sifted through.
In some cases, drug dealers, blacklisted international sanctions breakers, fraudsters, money launderers and arms dealers, are said to also be reaping the benefits of this web of financial secrecy. They are facilitated by MF and banks that assure the public that they are neither aware of nor complicit in any illegality.

Interactive map of
Companies and shareholders
in Panama Papers scandal
developed by Brian Kilmartin
published by the Irish Times
can be found: HERE

As to the three Croatia-based firms identified in the Panama Papers the Prime Minister Tihomir Oreskovic has stated 4 April 2016 that “we have not yet seen which companies these are, our finance ministry has offices that will investigate and check the allegations and if proven true, we will communicate that to the public.” Oreskovic commented that he was aware of the fact that money laundering was a big problem and that there are criminal elements that exist but that “it’s most important that the country has a system that monitors that.”

Croatia’s Finance Minister
Zdravko Maric
Photo: HINA/Damir Sencar

The Croatian Finance Minister Zdravko Maric said Monday 4 April 2016 that his Ministry “was carefully following developments regarding the Panama Papers scandal and was taking all measures and activities envisaged by the relevant laws regarding information on the possible involvement of Croatian companies or nationals in the scandal,” reported HINA Croatian news agency.
It’s important to note that offshore structures created to reduce taxes are legal in many cases and corruption in the criminal act for is not necessarily involved but there is not doubt that moral corruption is! There is no doubt that political corruption and hypocrisy is involved for how could any honest and decent political leader call for people to pay taxes and yet personally try to avoid paying it himself/herself or minimise it. The hundreds of journalists across the world working through the papers have uncovered plenty of apparent illegal activity so far, and I await with great interest the investigations in Croatia about the three companies reportedly keeping their cash stash well salted, avoiding taxers, in offshore accounts set up for them by the Mossack Fonseca. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)

Filed Under: Uncategorized Tagged With: corruption, Croatia, International Consortium of Investigative Journalists, Mossack Fonseca, Panama Papers, tax evasion, Tihomir Oreskovic, Zdravko Maric

Croatia: A Stalinist Lean?

July 5, 2015 by inavukic 32 Comments

Zoran Mamic (left) and Zdravko Mamic (right)
Photo: Ivica Tomic

Arresting someone on suspicion or charges of tax fraud and embezzlement is not an uncommon thing throughout the world, so the fact that it occurs in Croatia is really not as newsworthy as the government controlled large part of Croatian media makes it out to be. But very few countries could beat Croatia and the current government’s sensationalistic executions of arrest and search warrants at the time when they should actually be publishing what they are doing to prevent hordes of young people exiting Croatia in search of work elsewhere.

When the Croatian public learned on Friday 3 July that the state bureau for combating corruption (USKOK) had finalised its investigation into allegations of embezzlement, tax fraud and evasion against the “bosses” of the Croatian most successful soccer club “Dinamo – Zagreb” and that arrests were imminent, the implicated brothers – Zdravko Mamic, the chairman of Dinamo Zagreb, and his brother Zoran Mamic, the club’s coach – were in Slovenia attending the club’s training camp. The Mamic brothers wasted little time and returned to Croatia to face the authorities but as soon as they crossed the border in a car Croatian police arrested them and drove them to prison from where they are expected to face the court and apply for bail! It’s not as if they were on the run from Croatia! Their homes were searched also and the president of the Croatian Football Federation, HNS, Damir Vrbanovic, was also arrested and placed into one-month custody as a measure preventing any influence on possible witnesses.
Zdravko Mamic is suspected of taking undeclared commission fees from the sale of several Dinamo players to foreign clubs. He has denied his and his brother’s wrongdoing. Sales of Dinamo players of note include: Luka Modric (Tottenham Hotspur, Real Madrid), Zvonimir Boban (AC Milan), Robert Prosinecki (Real Madrid, Barcelona), Eduardo da Silva (Arsenal) and Alen Halilovic (Barcelona).
Zdravko Mamic, known for his ardent love of the Croatian nation and its independence, responded by saying that the criminal investigation represents “genocide” against him, his family, Dinamo and the Croatian state.
“…The whole world will find out about this and will see that the government which is the descendant of the Communist Party has not moved away from its methods, that is, political reckoning with those who think differently. Of course all this is an order from the very top of the government, from the Prime Minister down…It’s clear from all his public outbursts that concoctions of various affairs against people of right-wing political orientation are rife…”

Croatian TV news said Saturday 4 July that this case represents the largest amount of money that the anti-corruption bureau USKOK has so far investigated. Reportedly USKOK alleges that brothers Mamic have through corrupt dealings, embezzlement, scooped for their personal benefit the sum of 117.8 million Kuna (15.2 million Euro) from Dinamo football club and 11.2 million Kuna (1.5 million Euro) from the state budget i.e. tax. Mamic brothers have denied guilt to these charges and vow to prove their innocence.

Croatian media said that the Mamic brothers are accused by the USKOK bureau as having channeled the funds into their private accounts by taking undeclared commission fees from the sale of Dinamo players to foreign clubs and through “illegal” contracts with individual players.

Zdravko Mamic’s solicitor, Jadranka Slokovic, said that her client had laid out a very wide defence through which he denied all charges put against him. She stated that in her opinion this is a case of a “malicious procedure through which documents about transfers of football players are wrongly read and presented” and that “on the other hand, we are looking at a political procedure that has the elimination of Zdravko and Zoran Mamic as its goal.”

The former president of Croatia, Ivo Josipovic, commented that it would be hard to even think that the charges of corruption were an election tool (for the leftist Social Democrats), because that would mean that Croatia is a Stalinist society, and that’s not true – he said.

That indeed is yet to be seen when it comes to this particular case but sadly the due process for either guilt or innocence will not pass through the courts before the elections early 2016. So, in effect, the arrests at this particular time and the sensationalism created around them do smell of political fodder for the public; and that fodder will not benefit the conservative political parties but the ones Josipovic and current government subscribe to. In this year of 2015, arrests on suspicion of corruption and fraud should be a “normal” matter, a “days work” so to speak instead of being unleashed into the media as some sensation that lasts for days! Croatia has been and is riddled with corruption and these latest arrests with their media fanfare for the benefit of the ruling political parties do strongly suggest that it is still all about politics and not about stemming out corruption at every level. To me, whether “brothers Mamic” or some local government officials were found guilty of corruption (and there are multitudes of those) is one and the same thing – equally bad, equally unacceptable. But people of “brother Mamic” social calibre and standing are perfect for the creation of public hysteria, whether “positive” or “negative” – and either does leave noticeable imprint on “opinion polls” and eventually on election results. This really does remind one of manipulations akin to a “Stalinist state” for in a true democracy corruption is individualised and individuals if found guilty bear all the responsibility, not the people or the nation. Ina Vukic, Prof. (Zgb); B.A.,M.A.Ps. (Syd)

Filed Under: Uncategorized Tagged With: Alen Halilovic, corruption, Croatia, Croatian Football Federation, Damir Vrbanovic, Dinamo Zagreb, Eduardo da Silva, HNS, Luka Modric, Robert Prosinecki, Stalinist society, tax evasion, USKOK, Zdravko Mamic, Zoran Mamic, Zvonimir Boban

Croatia: Fiscalization to control gray economy

January 12, 2013 by inavukic 19 Comments

Fiscalization in Croatia Photo: Dusko Jaromaz/Pixsell

Fiscalization in Croatia Photo: Dusko Jaramaz/Pixsell

The concept and the practice of fiscalization in controlling the gray economy, stamping out or minimizing avoidance of business sales tax, goods and services tax or VAT or whatever it’s called depending on where you live, has as of 1st January 2013 become a reality in Croatia. Fiscalization generally pursues as efficient as possible control over business operations and their turnover.

If any country needs such a system of control then the countries still struggling out of Communism would surely be at the top of the list.

One may ask: but there was enough control under Communism, why impose more? The answer to that question could include that fiscalization doesn’t fall under political controls aimed at benefiting the political elite and sustenance of totalitarianism where citizens’ livelihood depended not on their personal contribution to the nation but upon the personal will of the political elite. Hence, fiscalization can be seen as a process that has every chance of modifying business people’s behavior towards personal responsibility within the common good, i.e. the nation.

In 1789, in his letter to Jean-Baptiste Leroy, Benjamin Franklin (one of the founding fathers of the United States of America), said: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes”. The latter sentence has not only become a famous quote in “Western” democracies but it’s implication that paying taxes is inevitable has somehow shaped the majority of individual citizen’s responsibility towards the common good, i.e. nation building. Under the thumb of Communism, and consequent widespread tax avoidance and corruption, Croatian people, regretfully, missed out on such social “pressures” to comply with tax laws and accept each individual’s responsibility towards the state.

Croatian government is currently enforcing its new Fiscal Law on cash-based businesses.

Under this law a fiscal device (computerised cash register) is placed into the system for monitoring tax pay or fiscal systems in the function of control over money traffic in accordance with law. Citizens will even be able to check with the tax office whether a receipt they’ve been given at a restaurant, say for the dinner they’ve consumed, has in fact reached the tax office electronic registry.

Fraud in terms of concealing sales from the tax office may seem insignificant if we think in terms of individual consumer, but it adds up to serious levels on the overall scale. Estimated losses for government tax revenue can add up to billions – and these billions are the billions necessary to secure funds for decent living standards and improvements as well as maintenance of public facilities.
So, fiscalization in the sense of current implementation in Croatia with cash dependent economy represents utilisation of tax collection system with help of various secure devices designed to safe keep amounts which taxpayer has collected from buyers, and produce report totaling sum of tax money needed to be paid into government’s budget. Undoubtedly, government revenue increase is set to increase via this system.

The Croatian Ministry of Finance has emphasized that it will ban business activities, stamp closed all premises of those businesses found not to comply with the new law, i.e. who are not issuing “fiscal receipts” for all sales. As life would have it, cafés, restaurants etc. are the first to comply. If, upon inspection, non-compliance is discovered and then rectified, then the business would be allowed to recommence with business.

About 400 fiscalization inspectors hit the streets of Croatia on January 8th and the plan is to inspect over 1,500 businesses by January 11.

A seemingly very costly, if not unaffordable, compliance check. Seemingly heavy handed flooding. Could be, but perhaps that is exactly what’s needed in the Croatian cash/gray economy which, to my view, has enjoyed a far too long a honeymoon period on issues of tax obligations.

On January 11th, Vecernji List reported that in the past five days, 418 fiscalization inspectors had completed 3,418 inspections and found 248 non-compliances. Hospitality businesses (restaurants, cafés…) found to be non-compliant were given 48 hours to correct this and achieve compliance.

This result is a good sign of better things to come for Croatian economy and business behavior.

Almost universal experience tells us that certain individuals will always invent solutions or ways to elude their fiscal duties, to avoid paying taxes or declare minimised income or profit in order to minimise their tax bill. Some humans are just like that and always will be. Tax evasion occurs in particular where there are faults and loopholes in legislation and enforcement methods are deficient. By the sound of things the latter is not a problem in Croatia these days: there’s almost an army of fiscalization inspectors on the streets. There’s even a Facebook page on the issue of fiscalization in Croatia; the potency of social media is bound to make its mark as well.

All said, near future will tell how efficient Croatia’s fiscalization system is. Certainly one cannot bypass the fact that it has imposed new burdens on those taxpayers who have been responsible with their tax obligations; they will need to invest in new computer technology and software, and some may struggle to find the initial cash flow necessary in order to meet compliance with new Fiscal law. Perhaps the Ministry of finance might look into assisting some businesses in this area at this early stage of legislation enforcement? Fiscalization will also increase operating costs of businesses, and indeed, some business owners are talking of job losses etc. because of fiscalization.
Fiscalization teething problems may be many, indeed, but oh what a great opportunity for a positive partnership between business, individuals and government.
To quote Jeff Heinrich of Montreal’s Gazette, on the issue of the success of similar fiscalization as in Croatia: “…there’s no question: Tax collectors certainly have an easier time doing their job now than they did before. And that’s good for everyone: taxpayers, businesses, the government, everyone.
We have to get the message out that tax evasion is harmful to the collectivity. Everybody, not just us, has to do their share to make sure there’s less of it.”

Couldn’t agree more! Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)