[Coronavirus] Firms in EU tax havens cannot be denied Covid bailouts

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Denmark, France and Poland are refusing to provide bailouts to companies that are registered in tax havens like Panama. But campaigners point out that the EU's Luxembourg and Netherlands are also home to firms avoiding paying billions into national coffers.

EUobserver

EU states cannot ban Covid-19 bailouts to companies based in tax havens within the EU, such as the Netherlands or Luxembourg.

The European Commission on Wednesday (29 April) told reporters member states must comply with freedom of capital rules outlined in the EU treaty.

"This means they cannot exclude companies from aid schemes on the basis of headquarters or tax residency in a different EU country," said a European Commission spokesperson.

The comment follows moves by Denmark, Poland and France to deny bailouts to companies registered in places like the US Virgin Islands and Panama.

The US Virgin Islands and Panama are among a dozen jurisdictions placed on an EU tax haven blacklist, none of which is an EU member state.

The state aid comes on the back of the pandemic, sending businesses into a free fall and economies into recession.

"Companies based on tax havens in accordance with EU guidelines cannot receive compensation," said Denmark's finance ministry, in a statement, earlier this month.

Polish Prime Minister Mateusz Morawiecki made similar comments as did French finance minister Bruno Le Maire.

"In general, we welcome this initiative by the members because we think it is a first step that public money doesn't have to go to tax havens," said Chiara Putaturo, a tax policy expert at Oxfam, an NGO.

Belgian wrist slap

Meanwhile, other states like Belgium are granting bailouts to all companies, regardless of whether they are in a tax haven.

As a general rule, Belgium forces firms to pay taxes in advance each quarter. Those who miss the deadline are penalised.

Unless the company is in a tax haven, Belgian finance minister Alexander De Croo has waived those penalties for missed payments in the first quarter of 2020.

"That is the only measure that was taken," said Michel Maus, a professor at Vrije Universiteit Brussel.

Maus says Belgium is losing €2.6bn each year because of tax avoidance linked "to 'normal' countries like the Netherlands, like Ireland, like Luxembourg."

The UK-based NGO, Tax Justice Network, says the EU's blacklist covers less than 10 percent of the world's financial secrecy services, and that tax havens in Europe have alone contributed to billions in direct revenue losses to state coffers.

By itself, Luxembourg accounts for $12bn of lost money among EU states by helping US multi-nationals under-report their profits, according to a recent Tax Justice Network report.

"For each additional $1 Luxembourg collected from US firms, the EU lost $32," says Tax Justice Network.

Luxembourg is also home to some of Europe's biggest companies, including French energy company Engie - which was ordered by the European Commission to pay €120m in unpaid taxes.

But unlike Belgium, the Netherlands is imposing greater restrictions on bailouts.

Dutch prime minister Mark Rutte recently announced that the government's second round of bailout measures would be more selective.

He said companies affiliated with tax havens and others that give dividends to their shareholders should be excluded.

Meanwhile, tax campaigners say a unitary taxation, an EU-wide minimum corporate tax rate of 25 percent, and greater transparency would help curtail such losses.

Similar demands have been put forward by Oxfam which also says Cyprus, Ireland, Luxembourg, Malta and the Netherlands should be included on the EU's blacklist.

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