In all, the global corporate tax system loses an estimated US$500 billion to avoidance annually, over three times the NHS budget, or roughly equivalent to the entire Gross Domestic Product of Belgium. Tax havens linked to the UK are responsible for around a third of the world’s corporate tax avoidance risk.
The government of Poland has followed Denmark in blocking companies registered in offshore tax havens from reaping coronavirus financial relief funds.
On 18th April, Stockholm announced companies which pay dividends to shareholders, buy back their own shares or are registered in offshore tax jurisdictions won’t be eligible for any state aid programmes, intended to ease the financial burden on firms suffering from the Covid19 lockdown.
“Companies seeking compensation must pay the tax to which they’re liable under international agreements and national rules. 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,” the Danish finance ministry said in a statement.
Poland has now included similar caveats in its own state bail-out schemes – in all, PLN 25 billion is available to companies operating in the country, but they must pay tax there to benefit.
“Companies usually fail not because of decreasing profits, but in a situation when there is no income. We must respond quickly and input this missing liquidity into the market and compensate for it as soon as possible. Let’s end tax havens, which are the bane of modern economies,” Polish Prime Minister Mateusz Morawiecki said at a press conference, unveiling the relief scheme.
No Tax Please, We’re British
The moves have led to calls on social media for similar restrictions to be added to state bailout packages in the UK. In 2019, the Tax Justice Network found the country was by far the world’s biggest enabler of corporate tax dodging, assisting in the funneling of hundreds of billions of dollars away from state coffers.
Moreover, it found that of the top 10 jurisdictions allowing multinationals to avoid paying billions in tax on their profits, four were British overseas territories. Topping the list was the British Virgin Islands, followed by Bermuda and the Cayman Islands – all British overseas territories. Jersey, a Crown dependency, was seventh while the UK itself came 13th.
Other countries in the UK network, including Turks and Caicos Islands, Anguilla, the Isle of Man, and Guernsey, also scored highly for corporate tax dodging.