Several European countries recently announced they will not be putting any COVID stimulus monies into the deep pockets of secrecy jurisdictions currently on the EU tax haven blacklist.
As economies around the globe are thrashed by the fallout of the COVID-19 pandemic, governments are pressed to create aid packages to sustain individual and corporate citizens alike. While there is no one-size-fits all stimulus package, it seems pretty logical to assume that countries that routinely ride high on preferential tax practices are not going to receive a lot of sympathy.
Recently, three countries, Germany, France, and Poland declared just that. A Danish order reads roughly, “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 12 regions that are subject to the poor press include (in no particular order):
- American Samoa
- Cayman Islands
- Trinidad and Tobago
- US Virgin Islands
While it makes sense that law-abiding taxpayers do not wish to bail out countries that are arguably cutting into their own tax base, the Tax Justice Network recently offered steps to help identify businesses (or tax havens) that should or should not qualify for a hand up. Some of those tests include:
- Has the region or business been involved in large scale money laundering networks and other tax frauds?
- Does the company or corporation behave transparently, identifying all its subsidiaries as prescribed by the Global Reporting Initiative?
- Does the group or corporation protect employees over shareholders during periods of economic instability and as bailout loans are paid back?
The TJN guidelines suggest that tax havens may qualify for stimulus monies even if they have not met one of the conditions stated. However, stimulus funds may be provided only on the condition that the irregularity is corrected by the end of 2020. Otherwise, the EU can simply disqualify them outright.
Given the historic behavior of tax havens such as Luxembourg or the Cayman Islands, it is unlikely these regions have any serious intent to swap stimulus bucks for a hoped-for return to the salad days before COVID-19.
COVID-19 has wreaked havoc on social and business communities around the world. To a lesser, more chronic extent, secrecy jurisdictions have been impacting lives and livelihoods for much longer.
Skilled legal guidance on criminal tax matters
Located in Cleveland and Chicago, the tax attorneys at Robert J. Fedor, Esq., LLC assists you navigate questions about offshore tax havens, false tax returns, or tax litigation. When you need skilled tax advice locally or abroad, call 800-579-0997 or contact us.