Monday

16th May 2022

Firms in EU tax havens cannot be denied Covid bailouts

  • Corporate tax arrangements in Luxembourg means billions are lost to national coffers elsewhere (Photo: Cesar Poyatos)

EU states cannot ban Covid-19 bailouts to companies based in tax havens within the EU, such as the Netherlands or Luxembourg.

The European Commission on Wednesday (29 April) told reporters member states must comply with freedom of capital rules outlined in the EU treaty.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"This means they cannot exclude companies from aid schemes on the basis of headquarters or tax residency in a different EU country," said a European Commission spokesperson.

The comment follows moves by Denmark, Poland and France to deny bailouts to companies registered in places like the US Virgin Islands and Panama.

The US Virgin Islands and Panama are among a dozen jurisdictions placed on an EU tax haven blacklist, none of which is an EU member state.

The state aid comes on the back of the pandemic, sending businesses into a free fall and economies into recession.

"Companies based on tax havens in accordance with EU guidelines cannot receive compensation," said Denmark's finance ministry, in a statement, earlier this month.

Polish Prime Minister Mateusz Morawiecki made similar comments as did French finance minister Bruno Le Maire.

"In general, we welcome this initiative by the members because we think it is a first step that public money doesn't have to go to tax havens," said Chiara Putaturo, a tax policy expert at Oxfam, an NGO.

Belgian wrist slap

Meanwhile, other states like Belgium are granting bailouts to all companies, regardless of whether they are in a tax haven.

As a general rule, Belgium forces firms to pay taxes in advance each quarter. Those who miss the deadline are penalised.

Unless the company is in a tax haven, Belgian finance minister Alexander De Croo has waived those penalties for missed payments in the first quarter of 2020.

"That is the only measure that was taken," said Michel Maus, a professor at Vrije Universiteit Brussel.

Maus says Belgium is losing €2.6bn each year because of tax avoidance linked "to 'normal' countries like the Netherlands, like Ireland, like Luxembourg."

The UK-based NGO, Tax Justice Network, says the EU's blacklist covers less than 10 percent of the world's financial secrecy services, and that tax havens in Europe have alone contributed to billions in direct revenue losses to state coffers.

By itself, Luxembourg accounts for $12bn of lost money among EU states by helping US multi-nationals under-report their profits, according to a recent Tax Justice Network report.

"For each additional $1 Luxembourg collected from US firms, the EU lost $32," says Tax Justice Network.

Luxembourg is also home to some of Europe's biggest companies, including French energy company Engie - which was ordered by the European Commission to pay €120m in unpaid taxes.

But unlike Belgium, the Netherlands is imposing greater restrictions on bailouts.

Dutch prime minister Mark Rutte recently announced that the government's second round of bailout measures would be more selective.

He said companies affiliated with tax havens and others that give dividends to their shareholders should be excluded.

Meanwhile, tax campaigners say a unitary taxation, an EU-wide minimum corporate tax rate of 25 percent, and greater transparency would help curtail such losses.

Similar demands have been put forward by Oxfam which also says Cyprus, Ireland, Luxembourg, Malta and the Netherlands should be included on the EU's blacklist.

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

Luxembourg not a tax haven, claims PM

The prime minister of Luxembourg, Xavier Bettel, maintains that his country had broken no rules and committed no crime when issuing rulings that slashed global tax bills for the big firms.

Opinion

German presidency's broken promises on 'fair tax'

At the start of the German presidency of the EU Council it committed itself to a "fair taxation" agenda. But as we enter the final leg of its six-month term, time is running out to make good on this promise.

EU Commission eyes unified corporate tax, again

The previous two efforts for a unified corporate tax framework have run into the ground, because the unanimity required by the member states to agree such a scheme was unachievable. Ireland, Denmark, Luxembourg, Malta, Sweden and the Netherlands were opposed.

Opinion

The EU Parliament Covid inquiry: the questions MEPs must ask

A basic lack of transparency around the EU's vaccines procurement negotiations has prevented effective public and parliamentary scrutiny. It has also made it impossible to answer some of the key questions we put forward here.

Opinion

Working at EU institutions not easy for ethnic minority staff

EU institutions have failed to create an inclusive culture for Europeans of colour and people with disabilities, according to the European Commission's first-ever survey on diversity, inclusion and respect at the workplace.

News in Brief

  1. McDonald's to sell up and exit Russia
  2. Nordic nations to help Sweden and Finland if attacked
  3. Germany to reject EU green label for nuclear
  4. Afghans and Syrians using Western Balkans to enter EU
  5. Putin: Russia will respond if Nato bolsters Sweden and Finland
  6. British PM urges Northern Irish parties to work together
  7. EU-US pledge to counter Russian propaganda in Ukraine
  8. EU greenhouse-gas emissions rebound to pre-pandemic levels 

Stakeholders' Highlights

  1. Nordic Council of MinistersClear to proceed - green shipping corridors in the Nordic Region
  2. Nordic Council of MinistersNordic ministers agree on international climate commitments
  3. UNESDA - SOFT DRINKS EUROPEEfficient waste collection schemes, closed-loop recycling and access to recycled content are crucial to transition to a circular economy in Europe
  4. UiPathNo digital future for the EU without Intelligent Automation? Online briefing Link
  5. Nordic Council of MinistersHuge support for Ukraine
  6. EFBWW – EFBH – FETBBWorkers want EC to limit subcontracting chains in construction

Latest News

  1. EU countries rush to expand gas import capacity
  2. MEPs call to speed up curbs on toxic 'forever chemicals'
  3. Russia's war stifles EU pandemic recovery
  4. Sweden and Finland Nato decision is right for Baltic
  5. Sweden to join Finland in applying for Nato
  6. Russia sanctions and energy dominate Next WEEK
  7. Will 'Putin's Nato' follow Warsaw Pact into obscurity?
  8. EU reaches deal on flagship cybersecurity law

Join EUobserver

Support quality EU news

Join us