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Companies in Tax Havens Denied COVID-19 Relief

Posted on Apr. 24, 2020

Some countries are taking a strong stance against offering coronavirus relief funds and tax relief measures to companies based in tax havens — a move only Canada has openly dismissed.

Following in the footsteps of Denmark and Poland, French Finance Minister Bruno Le Maire said April 23 that state-guaranteed loans, payroll tax deferral, and direct tax reductions will not be available to companies headquartered in tax havens.

“If a company has its tax headquarters or subsidiaries in a tax haven, I want to say with great force, it will not be able to benefit from state cash aid,” Le Maire said in an interview with Radio France. He previously called for corporations that receive state aid not to pay dividends or offer share buybacks to shareholders.

Denmark and Poland announced earlier in April that they had decided to exclude companies located in tax havens from coronavirus relief measures, including VAT refunds, payroll tax deferrals, relief funds, and waived fees on direct tax payments.

In response to those decisions, the Tax Justice Network published a five-step “bail or bailout” test designed for governments to determine whether companies are “discreetly using tax havens to pay less tax.”

“We’ve put together the ‘bail or bailout’ test to help governments make sure taxes go towards protecting people’s jobs and wellbeing instead of rewarding tax abusers with retreats to luxury resorts,” said Alex Cobham, chief executive of the Tax Justice Network, in an April 23 blog post.

Luxembourg has announced that it will bar companies from taking tax deductions on interest or royalties owed to businesses based in countries on the EU blacklist starting January 1, 2021.

The draft law, submitted to the parliament March 30, says a Luxembourg business may be exempt from the new rule if it can prove that the transaction causing interest or royalties was for valid business reasons. The law will be responsive to updates to the blacklist.

Canadian Prime Minister Justin Trudeau said he won’t prohibit companies operating in tax havens from accessing coronavirus stimulus funds.

“We do not want to punish workers based on the company they work for. They have families and communities that depend on them. We are focusing on the workers and not the company,” Trudeau said in Parliament April 20.

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