It can be difficult to really understand what you’re getting into when it comes to any international expansion. On paper, it should be easy — company X identifies a market opportunity in a new country, sources a candidate, hires the candidate.
It’s not that easy.
Not only does Company X have to jump through all the hoops of setting up an employee (or several) in a new country, but Company X is also put in a position where they have to trust a variety of companies, service providers, and people who they know very little about.
Of course, there are extremely reliable in-country companies doing business on behalf of U.S. companies all over the world. But, as we saw in 2017, there are a few bad apples too.
Take for example the scandal perpetrated by an organization called Plutus Payroll based in Australia. According to the Global Payroll Association, a professional association for international payroll businesses, Plutus Payroll “has been named as sitting at the heart of an AU $165 million (US $122.5 million) tax fraud, which is being billed as one of Australia’s largest ever white collar crimes.”
This, in part, is how the scam worked, according to the Global Payroll Association:
The fraud scheme allegedly saw the payroll company, which was run by syndicate members, accept money from legitimate clients in order to process payroll on their behalf. The money was then apparently transferred to seven sub-contracted organisations, dubbed ‘tier two companies’, which made payroll payments to individual workers. The two tier companies were essentially fronts run by so-called “straw directors”, not all of whom were believed to be aware of what was going on. The companies themselves were controlled by syndicate members and were contractually obliged to remit Pay-As-You-Go withholding tax payments to the ATO on behalf of Plutus’ customers. The investigation revealed, however, that these tax obligations were only partially paid, while the rest was siphoned off and channeled through a complex system of companies and trusts.
There have been a variety of other payroll scandals throughout the world over the past year, but they can be difficult to spot. This is why it’s so important to do business with a trustworthy vendor who knows the global business space.
There’s no substitute for working with a U.S.-headquartered company with all the protection and security of operating under U.S. jurisdiction.
Globalization Partners has recognized subsidiaries around the world, and the deepest legal bench in the industry, which goes to painstaking effort to make sure we’re following all the in-country laws. Learn more about the Global PEO model, and how we can help you with your global expansion needs. Get in touch today.