The European Commission confirmed that current rules allow EU countries to block coronavirus aid from going to companies based in tax havens.
“It is up to Member States to decide if they wish to grant State aid and to design measures in line with EU rules and their policy objectives, such as to prevent fraud and tax evasion or aggressive avoidance,” a European Commission spokeswoman said in an email Friday.
France, Poland, and Denmark have proposed barring companies that are based, or have subsidiaries, in tax havens from receiving bailouts linked to economic hardship brought about by the coronavirus.
“Member States can introduce additional criteria, such as the exclusion of companies operating in certain specific sectors, companies based in tax havens (as defined by the relevant EU legislation) and companies with a long-term debt with the national tax authority,” the spokeswoman said.
However, these countries must also comply with European Union free movement of capital rules, which state they “cannot exclude companies from aid schemes on the basis of headquarters or tax residency in a different EU country.”
The EU list of tax haven countries includes those that encourage abusive tax practices.
Tax Haven Countries
Denmark will link its definition for tax havens to the EU list of non-cooperative jurisdictions for tax purposes, a spokesman for Danish Finance Ministry said.
“If you have to write the rules so that you are within the EU laws governing how you support businesses, then you have to use the EU’s black list to make sure that you are within the EU law,” the spokesman said.
This means the countries can only block aid from companies based in American Samoa, Cayman Islands, Fiji, Guam, Oman, Palau, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands, Vanuatu and the Seychelles. Those countries are on the EU’s list of tax havens.
A spokesperson for the French Finance Ministry confirmed that its ban would apply to Anguilla, the Bahamas, Fiji, Guam, the U.S. Virgin Islands the British Virgin Islands, Oman, Panama, American Samoa, Samoa, Seychelles, Trinidad and Tobago, and Vanuatu.
The fact that the bans are applied only to the EU’s list of tax-haven countries has come under sharp criticism from tax justice campaigners, who argue it doesn’t go far enough to address the issue.
“For years, the corporate tax havens like the British Virgin Islands, the Netherlands and Luxembourg have fueled a race to the bottom, handing over wealth and power to the biggest corporations and taking it away from the nurses and public service workers risking their lives today to protect ours,” said Alex Cobham, CEO of Tax Justice Network.