Poland And Denmark Are Refusing To Give Bail Out Packages To Companies Registered In Offshore Tax Havens
Tags: Coronavirus, News
As major companies around the world request financial bailouts during the coronavirus crisis, they may find that their tax avoiding schemes could come back to bite them.
Many of the wealthy elite and the biggest global corporations make use of ‘tax havens’ to increase their profits.
Tax havens are nations which provide low or non-existent business taxes.
Countries such as the Cayman Islands, the British Virgin Islands, Panama, Gibraltar, the Bahamas, Andorra and Bermuda are known to provide these services.
What often happens is that international companies register themselves at an address in one of such places in order to avoid playing tax back home.
Billions of potential tax revenue lost each year
According to an article on Taxjustice.net, “an estimated $500 billion in corporate tax is dodged each year globally by multinational corporations – enough to pay the UN’s under-funded humanitarian aid budget 20 times over every year.”
The same article, published less than a year ago, also states that “Forty per cent of today’s cross-border direct investments reported by the IMF – $18 trillion in value – are being booked in just 10 countries that offer corporate tax rates of 3 per cent or less.”
European nations such as the UK, the Netherlands, Luxembourg and Switzerland are also reported to facilitate tax avoidance.
Now, with some of these companies hoping to benefit from government bailouts during the coronavirus pandemic, countries such as Denmark and Poland have put their foot down. Others are expected to follow.
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Denmark’s Finance Ministry issued the following statement last weekend.
“Companies seeking compensation after the extension of the [bailout] schemes must pay the tax to which they are liable under international agreements and national rules,” the statement said.
“Companies based on tax havens in accordance with EU guidelines cannot receive compensation, insofar as it is possible to cut them off under EU law and any other international obligations.”
Poland have made available PLN 25 billion for struggling businesses. But they also plan to keep this money away from companies who have been benefitting from tax havens.
“Let’s end tax havens, which are the bane of modern economies,” Polish prime minister Mateusz Morawiecki said.
Fabio Fazio, a well-known Italian broadcaster, went even further with his criticism of tax avoiders.
“It has become evident that those who do not pay their taxes are not only guilty of a crime, but of murder: if the beds and the respirators are not there they are partly to blame,” he wrote in an article for La Repubblica.
One issue which European nations like Denmark and Poland may face is that they may have to reference the European Unions’ corporate tax avoidance blacklist, which does not include all of the worst-offending tax haven nations.
Could the current crisis bring about tax reforms?
Paul Monaghan, chief executive of Fair Tax Mark, is hopeful that the current situation could mark a watershed moment in tax avoidance.
“To the man and woman in the street this isn’t that radical, what we’re asking for. Polling by Fair Tax Mark shows it is popular,” he said.
“The public mood, the narrative right now about everyone pitching in and expecting fairness, means it is very conducive for some breakthroughs on tax. We are potentially standing on the precipice of some quite big gains.”
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