Critics of Tax Havens Argue That the Coronavirus Should Serve as a Catalyst for Tax Overhaul
It is no secret that the coronavirus has had a dramatic impact on the world, including numerous unexpected consequences. Those who criticize tax havens argue that one of these changes spurred by the pandemic should be a tax overhaul, including rethinking tax havens.
Companies That Use Tax Havens Receive Bailouts
In some ways, the current pandemic has brought more attention to the issue of tax havens. International corporations that take advantage of tax havens to avoid paying taxes have received bailouts from their governments.
One example is Richard Branson, the Virgin Atlantic founder and leader, asking the UK government for a loan of £500m. Given that Branson has purposely lived on a Caribbean Island (that he owns) and therefore not paid UK taxes for 14 years, there are many critics of his request for a loan.
Countries around the world are split on whether companies that operate in tax havens are eligible for bailouts, and each country seems to enforce slightly different requirements for aid. Poland, France, and Denmark are among those restricting assistance to companies based in tax havens. Regardless of the policy of an individual country, this issue has brought the problem of tax havens into the public eye on a greater scale.
With tax havens once again in the public eye, many critics have become more vocal about their disapproval for the systems that allow them.
Critics Argue the Tax Rules Are Outdated
In addition to the justified concerns about companies receiving coronavirus aid from the government despite avoiding taxes, critics of tax havens point out that our current tax system has not seen significant changes in years.
The current framework in place used to tax global firms is more than a century old. Additionally, that taxation framework, critics argue, was created when global trade was very different. At the creation of the framework, the global business primarily focused on moving physical goods. Today, intellectual property and services are also crucial parts of the worldwide market.
Critics Argue That Even Without Tax Havens, Companies Do Not Pay Enough Taxes
Many critics of tax havens take their criticism a step further and point out the low corporate tax rates. For example, in the United Kingdom, companies paid 28 percent on profits in 2010, but it is now just 19 percent. Most countries also have extensive loopholes that allow companies to pay a lower percentage of profits in taxes than the local regulations would lead a person to believe.
The Current Crisis Showcases More Uses for Tax Dollars
Yet another point made by critics of tax havens is that the coronavirus has served to highlight how stretched government funds are in many areas. In many countries, social safety nets are minimal due to insufficient funds to increase them.
In the United Kingdom, where healthcare is publicly funded, critics point out that crucial medical staff is underpaid, overworked, and without necessary personal protection equipment due to a lack of funding. Others point to the current statutory sick pay in the UK of just 95 pounds a week. These issues could be dramatically reduced if companies pay more taxes or are no longer able to avoid taxes by moving funds offshore.
What Critics Call For
Those who have been most vocal against tax havens argue that coronavirus has shown the minimal financial contributions that companies using tax havens make to their local governments. They also point out that the crisis has shown areas in which additional tax funds could be incredibly useful.
Despite the criticism, there is no indication that there will be any significant steps taken against tax havens. Even in countries that restrict bailouts to tax havens, there are typically workarounds or loopholes available.
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