Denmark and Poland are among the first countries to exclude companies located in tax havens from claiming coronavirus relief, and two advocacy groups are pushing the United Kingdom to follow suit.
In an April 18 release, Denmark’s Ministry of Finance outlined a variety of measures approved by the parliament to help alleviate the financial strain that the coronavirus has placed on the business sector and taxpayers. Those measures expand on a March 19 relief package, introducing additional measures to curb layoffs and bankruptcies.
The expanded strategy includes interest-free loans in the form of VAT refunds to small and medium-size enterprises and the extension of the payroll tax deadline for individuals working in specific sectors. In March the Ministry of Taxation said it would waive fees and interest on direct tax payments due in March that were not included in an earlier economic aid package.
According to the MOF release, the relief measures will not apply to companies registered in tax havens as defined in EU guidelines and that pay dividends or buy back shares in fiscal 2020 and 2021.
Lars Sandahl Sørensen, CEO of the Confederation of Danish Industry, said in an April 18 release that while the initial relief package came quickly, it had gaps that needed to be addressed. The new agreement shows that the government listened and is giving companies a helping hand, he said.
Poland is also excluding companies located in tax havens from its coronavirus relief measures. In an April 8 release, Prime Minister Mateusz Morawiecki announced the Financial Shield initiative, which he said will transfer PLN 100 billion (about $24 billion) directly to companies to help protect jobs. Of that amount, about PLN 25 billion will go to large companies that pay taxes in Poland, but companies in tax havens will receive no financial assistance, according to media outlets.
Tax Justice UK, an independent partner of the Tax Justice Network, praised Denmark and Poland's corralling of their relief measures and said the United Kingdom should take similar action.
“Companies that seek to dodge their obligations to society by cutting their tax bills shouldn’t expect a bailout when things go wrong. The U.K. should ensure that all bailouts come with conditions to ensure good business behavior," Robert Palmer, Tax Justice UK's executive director, said in an April 20 blog post. "After the crisis we need a new deal between business and government to ensure that all companies contribute properly, including by paying their fair share of tax. Bailouts should be accompanied by reassurances for workers on furlough that they'll still be supported."
In a tweet the same day, Palmer said he had already heard of companies seeking to transfer losses booked in tax havens onshore in order to reap the tax benefits.
On April 20 Fair Tax Mark, a certification scheme that promotes corporate tax fairness and transparency, tweeted a letter to Chancellor of the Exchequer Rishi Sunak, asking him to implement several eligibility requirements for COVID-19 business support. The group proposed requiring qualifying businesses to publish a binding tax policy shunning tax avoidance and the use of tax havens, to commit to declare profits where they arise, and to make the consolidated annual profit and loss of a parent company public, among other things.
Fair Tax Mark said Denmark and Poland’s actions are a positive step, but that their reliance on the EU’s tax haven blacklist weakens their moves.