Business Insider Edition

Denmark and Poland are refusing to bail out companies registered in offshore tax havens

Bill Bostock , Business Insider US
 Apr 20, 2020, 07:00 PM
British Virgin Islands.
The British Virgin Islands.
  • Denmark and Poland won't give financial aid to companies registered in offshore tax havens.
  • Governments around the world are scrambling to bail out their economies with huge stimulus packages amid the coronavirus crisis.
  • Denmark and Poland are the first to exclude firms that incorporate themselves in famous tax havens, meaning they can avoid domestic business taxes.
  • "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," Denmark's finance ministry said on Saturday.
  • For mores stories go to www.BusinessInsider.co.za.

Denmark and Poland are refusing to let companies registered in offshore tax havens access financial aid from their coronavirus bailout packages.

The Danish government extended their bailout program into July on Saturday, the Finance Ministry said, but stressed that firms based in tax havens would no longer be covered.

"Companies seeking compensation after the extension of the 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 took similar measures on April 8.

Prime minister Mateusz Morawiecki said large companies wanting a chunk of the PLN 25 billion (R112 billion) bailout fund must pay domestic business taxes.

"Let's end tax havens, which are the bane of modern economies," he added.

Tax havens are countries that have low or non-existent businesses taxes.

Companies officially register themselves at addresses in those countries, meaning they often avoid paying business taxes to the countries in which they operate.

Amongst the most famous havens are Gibraltar, the Bahamas, Andorra, Bermuda, the British Virgin Islands, the Cayman Islands, and Panama.

It is unclear if other European nations will follow the example of Denmark and Poland, but it is unlikely that authorities in the UK, the Netherlands, Switzerland and Luxembourg will do so.

All four have provisions which make them attractive to businesses, and also allow them to be registered offshore. "Together [they] account for fully half of the world's tax evasion," according to The Tax Justice Network.

Some industries are famous for making the most of offshore tax breaks - most notably, the cruise industry, which has been ravaged by the coronavirus.

Carnival Corporation, Royal Caribbean, and Norwegian Cruise Line make up more than two-thirds of the industry's bulk, but are formally registered as companies in Panama, Bermuda, and Liberia respectively.

A number of cruise ships played host to major coronavirus outbreaks while at sea, drawing international media attention.

Cruise operators initially called on the US government for a bailout, and hoped the $2 trillion (R37 trillion) Senate relief bill would provide a lifeline.

However, it stipulates companies must be "created or organised" in the US. The Cruise Lines International Association told the Washington Post on March 26 they were unable to get aid.

Campaigners in several nations are calling on governments to go after offshore funds. They say claiming these taxes is vital to weathering the upcoming financial crisis caused by the coronavirus.

"Sustainable, robust public responses to shocks require administrative capacity and tax resources," Rasmus Corlin Christensen, from the International Centre for Tax and Development, told the ICIJ.

"Tax avoidance and global tax competition, more broadly, strain the ability of countries to raise those resources."

Fabio Fazio, a prominent Italian broadcaster, said tax avoiders were complicit in deaths from the virus.

"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.

Alan Rusbridger, the former editor of the Guardian newspaper, said the UK government should force companies with offshore tax breaks to relinquish them in exchange for government aid.

"We're starkly realising our public services are drastically underfunded. So here's a suggestion: before any company receives a penny in public Covid-19 support they must first pledge to scrap any artificial tax avoidance arrangements in future," he tweeted on March 22.

"A huge number of corporations engineer ways of avoiding putting any tax the way of our hospitals & other essential services."

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