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Low cost flight pilots start thinking of tax planning but authorities are after them with full force

Sunday, 02 September 2012
Norwegian Low-cost carrier, Norwegian, begins long haul flights next year and is looking to recruit pilots. But they would not be employed directly by the company. They would and are being employed through employment agencies which also helps them to get their salaries into tax havens for safe keeping from the Swedish or Norwegian tax man.

Since it is easier for the tax man to go after individuals, the Norwegian  and Swedish Tax Agencies have started to chase the contracts of the pilots.

Right now, the airliner, Norwegian, is seeking the services of pilots who can fly from Scandinavia to long distance destinations such as Bangkok, New York and the like. The recruiting company in charge of looking for the required skills is reported to be New Zealand staffing company, Rishworth Aviation and pilots will be based in Bangkok. But the employment requirement is that the pilots should have the right to live and work in the EU.

According to report, the corporate agenda with this is to avoid the employer's responsibility. The idea is to enable pilots to pay their social security contributions in Thailand. But they will be based Scandinavian  according to reports.

The pilot can select the country in which their salaries will be paid and the staffing company helps to register their account in such a low-tax countries, or where the taxes would be lower than in Sweden or Norway.

One of the main driver is that the pilots think that they can avoid paying Swedish  and Norwegian taxes, get a high salary, but live in Sweden and Norway in most cases  and enjoy the facilities that are funded by taxes.

Now, the salary for a pilot contracted by staffing company looks at first glance to be higher than they would have received as an employee. But with pension contributions, social security contributions and payroll taxes, it comes down to 30 - 40 percent lower, if the these salaries were to be paid in Sweden, that is.

In May, about 70 Swedish pilots became unemployed after regional carrier, Skyways filed for bankruptcy. This is a similar trend followed by one of four European companies in this category, driven by high competition for passenger and skyrocketing fuel prices.

In Norway right now, the Norwegian Tax authority is an investigating both cabin crew and pilots employed by staffing companies  - though they do not want to single out specific companies. But it is no secret that companies like Ryan Air and Norwegian use staffing company whose approach is for pilot to receive salaries paid by a separate company.

Ryanair has retained its pilots through a Gibraltar Registered staffing company,  Brookfield Aviation. Brookfields model, as well as those described pay the salary of theirs pilots in a way that looks like he or she may be resident in any country other than where they really are living now.

The Swedish Tax Authority is following the investigations with keen interest.

"We have a close cooperation with our Nordic colleagues where we look at these kinds of staffing companies. This is a high-risk group, and we have previously been drawn to the phenomenon, "said Katrina Birch, national project manager for international transactions focusing on tax havens at the Tax Agency.

The airliner, Norwegian through its communications manager, Anne Sissel Skånvik, defended the company's business model in a debate article  on the Swedish business daily, Dagens Industri.

"The airline industry is global and goes in the same direction as shipping., we are only a few decades late. The fact that airlines and other companies use of temporary workers is nothing new, "she wrote.

According to the paper, Åsa Larsson, Norwegian's press officer in Sweden tells told the paper that pilots and cabin crew employed by staffing companies may choose to be employees of the staffing company or if they want to be self-employed, it is their choice. That was rejected by the pilot the paper spoke to.
by Scancomark.com




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