In Its Search for 9 Billion Euros, Lufthansa Listed Its Tax Haven Subsidiaries
In its quest for official assistance from the government, Lufthansa has listed its tax haven subsidiaries. This move comes amidst criticism of international organizations that use tax havens to avoid paying taxes, yet have requested bailouts due to the current economic crisis.
In May, Lufthansa published a list that it claims contains all of the companies in Lufthansa Group based in “non-cooperative tax jurisdictions,” with the determination of which jurisdictions are “non-cooperative” coming from a European Union list. According to the European Union, that list outlines the countries and territories that are not cooperative for tax purposes.
On the list, Lufthansa Group included both part-owned and wholly-owned subsidiaries in Panama as well as in the Caribbean on the Virgin Islands and the Cayman Islands plus in Guam, in the Pacific.
The Accompanying Statement
According to Lufthansa Group, every single one of the companies on the list it published have operational businesses that are part of LSG Group. The company provided examples such as those that produce meals or offer logistic services to airports and local airlines. The majority of these subsidiary companies are responsible for services such as ground handling and catering.
Lufthansa released a statement that reminded readers that it is a global company. As such, it is represented across many countries via subsidiaries or itself. Lufthansa Group further clarified that within each country it operates in, the company ensures that it follows all international and national tax and legal regulations.
Location decisions, according to Lufthansa Group, rely on a range of parameters. The company provided the example of LSG Group being a global catering specialist and choosing locations based on operational reasons.
The publication of this list by Lufthansa Group appears to come in response to pressure from the government and politicians in Germany, due to the airline group seeking government assistance in the form of a state bailout.
Lufthansa is just one of many major international corporations that have attracted unwanted attention from those who criticize its perceived combination of tax avoidance strategies and request for governmental bailouts.
In the case of Lufthansa Group, the company is negotiating a stabilizing package with the German WSF, its federal economic stabilization fund. The negotiations are for approximately 9 billion euros.
In addition to publishing a list of its subsidiaries that operate in non-compliant tax jurisdictions, Lufthansa Group may have to make other concessions as part of the negotiations. Those in the know said that in exchange for the bailout, the WSF might receive a seat on the Lufthansa board and a stake of as much as 25 percent of the company.
The Larger Context
The negotiations between WSF and Lufthansa come amidst the broader context in which multinational corporations worldwide seek financial assistance from their local governments. This has led to a renewal in the debate regarding tax havens. Those opposed argue that as these corporations avoided paying taxes by using tax havens, and they should have no claim to the benefits from taxpayers.
Other opponents take a more moderate approach and argue that corporations that use tax havens should receive government assistance, but only if they meet requirements regarding future taxes.
Those in support of tax havens argue that these offshore financial centers are entirely legal. As the companies, such as Lufthansa, are fully compliant with the law and all tax regulations, they should be entitled to receive the stimulus funds just as any other company would. The debate is likely to continue, as each country has taken a slightly different approach to the matter.
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