Denmark and Poland are refusing to bail out companies registered in offshore tax havens
By Bill Bostock (Business Insider)
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,” Denmark’s finance ministry said on Saturday.
“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 of Tax Justice UK, told Business Insider.
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 ($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 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.
“Together [they] account for fully half of the world’s tax evasion,” according to The Tax Justice Network.
All four have provisions which make them attractive to businesses that also allow them to be registered offshore.
“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.
“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.
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 Senate relief bill would provide a lifeline.
However, it stipulates companies must be “created or organized” 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.
Doctor Giovanni Passeri relaxes in the doctor’s lounge after completing a routine round of medical examinations during a night shift in his ward in the COVID-19 section of the Maggiore Hospital in Parma, northern Italy, Wednesday, April 8, 2020. Most of the times he is on a night shift the couch is the best Passeri can get to stretch out. A cardboard box at right holds envelopes with the medical charts of discharged patients. (AP Photo/Domenico Stinellis)
“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. See tweet at 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.”
Virgin Atlantic is registered in the UK with its head office in Crawley
See much earlier, in May 2019:
Jet fuel tax hopes lifted by leaked EU report
By Sam Morgan | EURACTIV.com
13 May 2019
Aviation’s carbon footprint would fall by 11%, or some 16.4 million tonnes of emissions, if the EU were to scrap jet fuel’s tax derogation, according to a leaked European Commission study.
Imposing a tax of €330 per thousand litres of kerosene could help address global warming, reduce noise pollution and raise €27 billion in revenues every year, a new study compiled by Dutch consultants CE Delft for the EU executive has revealed.
The report, leaked to the press on Monday (13 May), found that ticket prices would increase by an average of 10% and aviation sector jobs would be cut by 11%, as a result.
Air travel supports 3.2 million EU jobs out of a total 194 million but the study insists that “its impact on overall employment within a member state […] would be close-to-zero”.
The authors also pointed out that similar reports did not take into account increased government spending as a result of new taxes.
“Changes in tax regimes must be carefully analysed especially because the role of aviation, a priority industry, varies by member states,” the authors warn.
The Greens/EFA group in the European Parliament has included a kerosene tax in its election manifesto and wants to spend the revenues on the continent’s train network, increasing services, shifting freight from road to rail and revitalising night trains.
Belgian lawmaker Bart Staes said in a statement that “for the aviation sector, the whole of Europe is a kind of tax haven. The idea that a tax on aviation is harmful to the economy is clearly a fairy tale.”
European railway association CER told EURACTIV that each form of transport should be responsible for the pollution it creates.
Executive Director Libor Lochman said the revenues from such a tax should “be earmarked for sustainable mobility and public health” initiatives.
Rail chief: ‘Instead of new corridors, enhance the existing ones’
President of Ferrmed Joan Amorós defends that, instead of investing in new corridors, EU and China should focus on improving the existing ones, “where the business is”. He also highlighted the importance of data sharing and the irruption of 5G to improve the efficiency of railway transport.
Aviation is currently taxed in different forms in Europe, from VAT on domestic flights to airport taxes, but fuel is exempt from levies thanks to an international agreement from 1944.
Other countries do impose fuel taxes on domestic flights though, including Canada, Japan, Saudi Arabia and the United States.
Clean mobility NGO Transport & Environment said EU countries have “long had the power to start taxing kerosene but have failed to do so”, adding that the 1944 pact only prohibits the taxation of fuel that remains in a plane’s tank when it lands at its destination.
The study also looked into the flipside of the argument and investigated how scrapping all aviation taxes would affect the EU economy. They concluded that flights and sector jobs would increase by 4% and GDP would be boosted by 0.2%.
However, the authors also found that passenger numbers and CO2 emissions would go up 4% as well, suggesting that more tax breaks are highly unlikely, given international commitments under the Paris Agreement on climate change.
The EU is already struggling to bring the transport sector to heel and it is now the only part of the economy where emissions continue to rise.
Data from EU statistics body Eurostat last week said that one out of every six trips was made by airplane and that 82% of those 218 million journeys were non-business related.
An official petition that calls on the EU to implement a kerosene tax was registered by the Commission on 30 April and will be open for signatures this week.
EU citizens insist jet fuel must be taxed
Airplane fuel’s tax-free status could soon be grounded after the European Commission agreed on Tuesday (30 April) to register an official petition that calls for an end to kerosene’s exemption.
The Taxing KerosenEU Citizens’ Initiative will elicit a response from the institution if it gets at least 1 million signatures from at least seven different member states over the course of the next 12 months.
Calls to impose some sort of taxation on aviation have gained momentum lately. Earlier in the year, Belgium and the Netherlands both championed taxation but left it open as to whether it would be levies on fuel or tickets.
Bilateral pacts between member states currently look to be the most plausible measure, as taxation is still an area in which the EU’s hands are tied, although the Commission has recently proposed changing the way environmental taxes are managed so that unanimous decisions will no longer be required.