The Current Pandemic Has Made the Divided Opinions on Tax Havens in the EU Clearer Than Ever

It is a well-known fact that tax havens are somewhat controversial. Those in favor of them point out that they are perfectly legal. Therefore, high net worth individuals and companies who take advantage of them are not breaking any laws. Those opposed to tax havens argue that they reduce the taxpayer funds that could help the local or national government provide services.

One of the many effects of the current pandemic has been to show just how divided the opinions on tax havens are. With most countries following plans that require a great deal of funding, the controversy regarding tax havens has increased in recent months. Even within the EU, there is a great divide in how countries handle tax havens in light of the coronavirus.

The Debate Regarding Bailouts

The main focus of the current debate regarding tax havens is whether those who use them should be allowed to benefit from coronavirus relief or bailouts. One side of this debate argues that companies that use tax havens do not pay taxes, or at least not as much as this side of the discussion would like, so they should not benefit from taxpayer money. The other side argues that since tax havens are perfectly legal, there is no logical or legitimate reason to prevent them from receiving taxpayer aid.

It Varies Country by Country

Where the government stands on this issue of tax havens and coronavirus relief varies significantly between countries. Wales, Scotland, France, Belgium, and Denmark are among those jurisdictions that have passed legislation preventing corporations that evade taxes from receiving bailouts from the state during the pandemic.

Poland took this stance even further, with the Prime Minister indicating that the coronavirus and the question of bailouts were the push needed to work to end tax havens. Prime Minister Mateusz Morawiecki went so far as to call tax havens “the bane of modern economies.”

On the other end of the spectrum, some countries, like Britain, have not taken any action to deny bailouts to firms that store their wealth in tax havens. This stance on the part of Britain is not a surprise to those familiar with the tax haven debate since the Tax Justice Network refers to the country as the most significant corporate tax avoidance enabler in the world.

The Official Stance in the EU

The official position of the EU combines elements of each side of the debate. Brussels supports member states that will withhold stimulus funds to those who use tax havens. But, importantly, the company in question must have a connection to one of the recognized tax havens.

That requirement means that those who use Panama, the Cayman Islands, or other tax havens are not eligible for a bailout. However, those who take advantage of tax havens that are not officially recognized as such cannot be denied these funds. Some EU member states that have been criticized for their low tax rates without being formally labeled a tax haven include Malta, the Netherlands, Luxembourg, Ireland, and Cyprus.

The Impact on the Future

While the current pandemic has highlighted the divided opinions regarding tax havens, this does not necessarily mean that any major changes related to those offshore havens are going to happen. At the moment, countries around the world have other concerns that are more pressing than tax havens. Even if there is a pushback against the blacklisted tax havens in the EU, those not on the list, such as EU member states with low tax rates, are extremely unlikely to notice changes.


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