Emotional toll of Shakira’s fraud investigation

Colombian singer Shakira has settled a tax fraud case with the Spanish authorities that could have seen her facing eight years in jail if found guilty, saying she needs to “move past the stress and emotional toll of the last several years”.

Although she still denies wrongdoing, the pop icon paid a fine of €7.4 million (£6.5million) just days before her trial was about to begin.

This was the second time the singer had been charged with tax evasion, with Spanish prosecutors claiming she defrauded the state of €6.7 million (£5.8 million) in 2018 when, amongst other things, she failed to declare millions in advance payments for her El Dorado World Tour.

The prosecution’s case hinges on the fact that in 2018, Shakira was living in Barcelona with football star, Gerard Piqué, and was therefore required to pay tax on all her international revenue there.

Under Spanish law, people who spend more than six months in the country are considered residents for tax purposes.

In July this year, prosecutors issued a document which claimed that she bought a house in Barcelona in 2012, which became a family home for her and Piqué.

Despite her lawyers arguing that until 2014 most of her income came from international tours and consisted of long periods living outside of Spain, according to the prosecution, Shakira committed fraud by diverting her earnings to “companies domiciled in countries with low taxation and high opacity”.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “This is a case that highlights the difference between tax avoidance, which is what Shakira seems to maintain she was doing and which is entirely legal and tax evasion which is what the Spanish tax authorities allege she was doing and which is illegal.

“The former involves legitimately arranging one’s affairs so as to minimise one’s liability to tax.  The latter involves breaking the law but failing to declare taxable income.

“In the UK, large fines such as those in this case tend only to apply in the most serious cases in which HMRC considers that taxpayer to have been guilty of large-scale fraud.  Even then, it is sometimes possible to reduce the level of penalties by offering full voluntary disclosure and cooperation.

This type of most serious tax investigation is known in the UK as a COP-9 inquiry and typically necessitates assistance from specialist accountants.”


Sources: BBC News, Metro

Posted in The Forensic Blog.