- 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,” a translation of a Saturday statement from Denmark’s finance ministry said.
- “Companies that seek to dodge their obligations to broader society by cutting their tax bills shouldn’t expect to get bailed out when things go wrong,” Robert Palmer, the executive director of Tax Justice UK, told Business Insider.
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The Danish finance ministry on Saturday extended its bailout program into July 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,” a translation of 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 a roughly $6 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 no business taxes. Companies that officially register themselves at addresses in them often avoid paying business taxes to the countries in which they operate.
Among the most famous havens are Gibraltar, the Bahamas, Andorra, Bermuda, the British Virgin Islands, the Cayman Islands, and Panama.
It is unclear whether 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 making them attractive to businesses that also allow them to be registered offshore.
“Together, they are responsible for half of the world’s corporate tax avoidance risks,” the Tax Justice Network said last year.
“Companies that seek to dodge their obligations to broader society by cutting their tax bills shouldn’t expect to get bailed out when things go wrong,” Robert Palmer, the executive director at Tax Justice UK, told Business Insider.
“The UK government should seriously look at copying Denmark’s approach. Any bailout needs to come with conditions to ensure good business behaviour.”
Her Majesty’s Treasury did not immediately respond to Business Insider’s request for comment on whether the UK would consider emulating Denmark and Poland.
Some industries are famous for making the most of offshore tax breaks – most notably the cruise industry, which has been ravaged by the coronavirus pandemic.
Carnival Corporation, Royal Caribbean, and Norwegian Cruise Line, which make up more than two-thirds of the industry, are formally registered in Panama, Liberia, and Bermuda.
Cruise operators had called on the US government for a bailout and hoped the Senate’s $2 trillion relief bill would provide a lifeline. However, it stipulated that companies must be “created or organized” in the US, and the Cruise Lines International Association told The Washington Post on March 26 that major cruise lines would be unable to get aid.
Experts and campaigners in several nations have called on governments to go after offshore funds, saying that claiming these taxes is vital to weathering the financial crisis caused by the coronavirus pandemic.
“Sustainable, robust public responses to shocks require administrative capacity and tax resources,” Rasmus Corlin Christensen, a research associate at the International Centre for Tax and Development, told the International Consortium of Investigative Journalists earlier this month.
“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 last month.
Alan Rusbridger, the former editor of The Guardian, 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,” he added.
This story was edited shortly after publication to clarify the job description of Rasmus Corlin Christensen. He is a research associate, not a campaigner.