[WSMDiscuss] Denmark, Poland refusing to bail out companies registered in offshore tax havens; fair-tax activists demand other countries do likewise

[Brian K Murphy]

https://www.msn.com/en-us/news/world/denmark-and-poland-are-refusing-to-bail-out-companies-registered-in-offshore-tax-havens/ar-BB12UE6l <https://www.msn.com/en-us/news/world/denmark-and-poland-are-refusing-to-bail-out-companies-registered-in-offshore-tax-havens/ar-BB12UE6l>
> Denmark and Poland are refusing to bail out companies registered in offshore tax havens
> 
insider at insider.com <mailto:insider at insider.com> (Bill Bostock) 20 April 2020
> 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 <https://www.businessinsider.com/what-is-a-bailout-coronavirus-stimulus-package-explained-2020-3> amid the coronavirus <https://www.businessinsider.com/coronavirus-live-updates-latest-news?r=US&IR=TIR=T> crisis.
> Denmark and Poland are the first to exclude firms that incorporate themselves in famous tax havens, meaning they can avoid domestic business taxes.
> Denmark and Poland are refusing to let companies registered in offshore tax havens <https://www.businessinsider.com/jake-bernstein-panama-papers-offshore-banking-shell-companies-2018-2> access financial aid from their coronavirus <https://www.businessinsider.com/coronavirus-live-updates-latest-news?r=US&IR=TIR=T> bailout packages. 
> 
> The Danish government extended their bailout program into July on Saturday, the Finance Ministry said <https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regeringen-og-alle-folketingets-partier-er-enige-om-at-justere-og-udvide-hjaelpepakker-til-dansk-oekonomi>, 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. 
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> "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 <https://www.pb.pl/rzad-i-nbp-oglosza-plan-pomocy-firmom-relacja-987800> large companies wanting a chunk of the PLN 25 billion ($6 billion) bailout fund must pay domestic business taxes.
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> "Let's end tax havens, which are the bane of modern economies," he added. <https://notesfrompoland.com/2020/04/08/poland-launches-e22-billion-support-package-for-firms-in-effort-to-save-up-to-5-million-jobs/>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 <https://www.businessinsider.com/tax-havens-for-millionaires-around-the-world-2019-11> 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.
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> "Together [those countries] account for fully half of the world's tax evasion," according to The Tax Justice Network. <https://www.taxjustice.net/2019/05/28/new-ranking-reveals-corporate-tax-havens-behind-breakdown-of-global-corporate-tax-system-toll-of-uks-tax-war-exposed/> All four have provisions which make them attractive to businesses that also allow them to be registered offshore.
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> "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, Executive Director at tax Justice UK, told Business Insider. 
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> "The UK government should seriously look at copying Denmark's approach. Any bailout needs to come with conditions to ensure good business behaviour."
> 
> Business Insider contacted Her Majesty's Treasury for comment on whether the UK would consider emulating Denmark and Poland but is yet to receive a response.
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> Some industries are famous for making the most of offshore tax breaks — most notably, the cruise industry, which has been ravaged by the coronavirus.
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> 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. 
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> A number of cruise ships <https://www.businessinsider.com/how-cruise-ship-companies-will-recover-from-coronavirus-pandemic-2020-3> played host to major coronavirus outbreaks <https://www.businessinsider.com/how-diamond-princess-cruise-ship-coronavirus-quarantine-went-wrong-2020-2> while at sea, drawing international media attention. <https://www.businessinsider.com/cruise-ships-with-confirmed-covid-19-cases-during-coronavirus-pandemic-2020-4> Cruise operators initially called on the US government for a bailout, and hoped the $2 trillion Senate relief bill would provide a lifeline.
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> However, it stipulates companies must be "created or organized" in the US. The Cruise Lines International Association told the Washington Post <https://www.washingtonpost.com/business/2020/03/26/cruise-line-bailout/> on March 26 they were unable to get aid. 
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> Experts and 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. 
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> "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 ICIJ. <https://www.icij.org/investigations/panama-papers/crumbling-economies-must-tackle-tax-evasion-to-tackle-coronavirus-crisis-experts-warn/>
> "Tax avoidance and global tax competition, more broadly, strain the ability of countries to raise those resources."
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> Fabio Fazio, a prominent Italian broadcaster, said tax avoiders were complicit in deaths from the virus.
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> "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. <https://www.repubblica.it/cronaca/2020/03/16/news/le_cose_che_ho_imparato-251384470/?ref=RHPPTP-BH-I251364842-C12-P22-S2.4-T1>
> 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.
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> "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. <https://twitter.com/arusbridger/status/1241656143295975424>
> "A huge number of corporations engineer ways of avoiding putting any tax the way of our hospitals & other essential services."
> 
> This story was edited shortly after publication to clarify the job description of Rasmus Corlin Christensen. He is a research associate, not a campaigner.
> 
> Read the original article on Business Insider <https://www.businessinsider.com/coronavirus-companies-tax-havens-banned-denmark-poland-bailout-2020-4>
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> 
> https://www.independent.co.uk/news/business/analysis-and-features/coronavirus-denmark-bailout-tax-haven-companies-uk-richard-branson-a9475081.html <https://www.independent.co.uk/news/business/analysis-and-features/coronavirus-denmark-bailout-tax-haven-companies-uk-richard-branson-a9475081.html>
> Denmark bans tax haven companies from accessing coronavirus bailout money – will other countries follow?
> 
> As companies ask for public funds to stop them going bust, some are facing scrutiny over how much – or how little – tax they pay
> 
by Ben Chapman <https://www.independent.co.uk/author/ben-chapman> April 20, 2020  | The Independent
> Denmark has told companies that they will not be eligible for bailout funds to help them through the coronavirus <applewebdata://E440CCB1-B421-40F2-9D5E-C5713E12FB9A/topic/coronavirus> pandemic if they are registered in tax havens <applewebdata://E440CCB1-B421-40F2-9D5E-C5713E12FB9A/topic/tax-havens>, prompting calls for other countries, including the UK, to attach similar strings to their own financial support packages.
> 
> The Danish government also said companies that access government support must not use profits to buy back shares or pay dividends to shareholders in 2020 or 2021. Earlier in April, Poland said its bailout funds would only be available to companies that pay tax in the country.
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> The moves have reignited debate over tax avoidance and come as Sir Richard Branson <applewebdata://E440CCB1-B421-40F2-9D5E-C5713E12FB9A/topic/sir-richard-branson> faced criticism after asking the UK government to bail out Virgin Atlantic <applewebdata://E440CCB1-B421-40F2-9D5E-C5713E12FB9A/topic/VirginAtlantic> with a £500m loan.
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> Sir Richard said in a blog post that he would offer his private Caribbean island as collateral against any money advanced by the government, warning that without help Virgin Atlantic would go bust.
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> Britain’s seventh-richest person, who has an estimated wealth of £4.7bn, said he has pumped £250m into the airline, which is 51 per cent owned by Virgin Group.
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> Campaigners pointed out that the group’s ultimate holding company, which Sir Richard and his family control, is based in the British Virgin Islands (BVI), which does not charge any corporation tax. Sir Richard has not personally paid tax in the UK for the past 14 years.
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> BVI ranks as the world’s number-one corporate tax haven, according to research by the Tax Justice Network. It’s also the ninth most secretive jurisdiction in the world when it comes to publishing companies’ financial information. Sir Richard said Virgin pays all taxes required of it in all jurisdictions where it operates.
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> However, Alex Cobham, chief executive of the Tax Justice Network, said in a tweet that it was “impossible” to assess the truth of Sir Richard’s claim because BVI companies provide little or no transparency.
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> Transport companies, some of which have been found in the past to have taken advantage of tax avoidance measures, were granted a £400m bailout earlier this month after plummeting passenger numbers threatened their survival.
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> Paul Monaghan, chief executive of Fair Tax Mark, an accreditation organisation that allows companies to demonstrate they make a fair contribution, said Denmark’s approach should be praised but it also has some limitations that the UK should try to avoid.
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> The Danish system will almost certainly have to use the EU’s corporate tax avoidance blacklist, which does not include some of the worst-offending countries.
> 
> The list was strengthened last year with the addition of the Cayman Islands, a key financial secrecy jurisdiction, but it is generally considered weak. EU nations, including the Netherlands, Ireland, Switzerland and Luxembourg, which facilitate billions of euros of tax avoidance every year, are not on it, nor are most of the overseas territories and crown dependencies that make up the UK’s network of tax havens, including BVI, Jersey and Guernsey.
> 
> “The Danes are doing as much as they can within EU state aid law,” said Mr Monaghan. “If you go down the route of excluding companies registered in tax havens you end up having to use the EU’s blacklist.”
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> Instead, Fair Tax Mark is proposing that any company that accepts bailouts must sign up to a set of binding fair tax principles. This would work in a similar way to the conditions attached when a company takes out a loan from a bank.
> 
> First, they would have to publish a tax policy that commits them to no artificial use of tax havens. Any bailed-out company would no longer be able to use accounting manoeuvres to move profits from where they are actually made to a low-tax jurisdiction such as Bermuda or the British Virgin islands.
> 
> The policy would be audited annually and signed off by a named director who is responsible for compliance.
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> Second, companies would have to commit to full “country by country” reporting of profits and taxes. “This is the long-standing ask of the tax justice movement because we don’t really know if companies are paying a fair amount in each country without it,” said Monaghan.
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> “Take the example of Google, which books about £1.6bn of revenue in the UK but we think it should be more like £6bn.
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> “I got my Microsoft Office subscription renewal through recently. It came from Ireland again, not from the UK even though Microsoft says it books profits where the activity is.”
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> Furlough scheme
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> Under Fair Tax Mark’s plan, companies that use the furlough scheme to claim refunds from the government for employees’ wages would not have to sign up. It would be specifically targeted at firms calling for a direct bailout, as Virgin Atlantic is. Unlike the Danish plan it would be solely focused on future conduct.
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> Mr Monaghan is hopeful that the current crisis can become a turning point for tax justice.
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> “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.
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> “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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