A growing number of European governments are insisting there won't be any emergency cash during the coronavirus pandemic for businesses registered in tax havens like Panama and the Cayman Islands.

Although it has been almost impossible to build consensus for tough action on tax justice at an EU level over recent years, the epidemic is now giving states such as France, Italy, Belgium, Poland and Denmark an opportunity to earmark bailouts for companies that have not fled to a fiscal paradise.

Tax justice campaigners fear this could be a cosmetic move that will not address the menace posed by tax havens within the EU, but French Finance Minister Bruno Le Maire was keen to stress on Thursday that Paris would be strict on the tax dodgers.

“If your headquarters are located in a tax haven, it is obvious that you will not be able to benefit from public aid,” he said on France Info radio.

Poland and Denmark were the first EU countries to attach fiscal strings to state support as the coronavirus crisis deepened.

The chief worry is that the definition of a tax haven is too narrow, avoiding European countries with lax rules.

Polish media reported that Warsaw in early April reserved €5.5 billion for large companies that “pay taxes in Poland, not in tax havens.” In a legislative amendment voted through in Copenhagen on Saturday, Denmark banned all aid for companies registered in countries on the EU's list of "non-cooperative tax jurisdictions." Italy and Belgium also have similar amendments in the works.

Taken as a whole, tax justice advocates say that these national measures could help boost transparency and, ultimately, a level playing field in global corporate taxation. “This is an important symbolic first step,” said Quentin Parrinello, who works on tax policy for the NGO Oxfam, “but much will depend on the modalities of the different proposals.”

The chief worry is that the definition of a tax haven is too narrow, avoiding European countries with lax rules. Raphael Pradeau, from the campaign group Attac France, argued that Le Maire's measures would not, for example, tackle the problem of Renault-Nissan, whose strategic partnership (also with Mitsubishi) is headquartered in the Netherlands, while Renault could benefit from state support. "This measure is largely symbolic," he said. "It's good news that there's debate but the measure shows that the government is just pretending to combat tax evasion.

"The French list of tax havens is very like the European one but it's a very political list. The main tax havens don't appear on it, for example Luxembourg, Switzerland and Delaware," Pradeau added.

The problem of tax havens within the EU is highly sensitive. Researchers from the University of California, Berkeley and the University of Copenhagen found that more than 84 percent of the revenue Italy loses because of tax havens goes to other European countries, with Luxembourg, Ireland and the Netherlands topping the table, closely followed by Belgium, which they also consider a tax haven.

While France has a 13-nation blacklist including the British Virgin Islands and the Bahamas, it does not include the Netherlands, Malta, Luxembourg or the U.S. state of Delaware.

Italy vs. the Netherlands

While the corporate sector carries no immediate responsibility for the crisis — unlike the banks in the financial crisis a decade ago — calls are growing to spend the unprecedented amounts of taxpayers’ money in bailouts ethically. In 2020, that means the beneficiaries should drastically reduce carbon emissions, not engage in dividend payments or share buybacks for a while and not dodge taxes.

France had a legislative proposal on blocking state aid to tax avoiders, which also excludes groups with only a subsidiary in a tax haven. This passed in the country's senate on Thursday, but not the joint committee, senate officials told POLITICO. The economy ministry does not regard this legislation as a necessary basis for impending decisions on state aid by Le Maire.

Belgian Finance Minister Alexander De Croo told parliament on Tuesday that he would consider including a similar amendment to Denmark's in a new proposal on tax deferrals next week. De Croo added that it was “not always easy,” referring to the case of Belgian marine dredging companies with genuine activities in Panama.

In Italy, Emanuele Felice, chief economic adviser to the governing Democratic Party, said on Wednesday that his party would try to include the proposal on tax avoidance in an update to emergency legislation this month. He appears to have the support of Luigi Di Maio, the foreign affairs minister from the 5 Star Movement, who said last week there was a need to tackle tax havens.

“The Italian proposal could be big if European tax havens are included,” said Tommaso Faccio, the head of secretariat at the Independent Commission for the Reform of International Corporate Taxation (ICRICT).

According to Oxfam, the EU should add Luxembourg, Ireland, the Netherlands, Cyprus and Malta to its blacklist of tax havens.

Sentiment in Italy recently turned against the Netherlands after its outspoken opposition to financial solidarity with Italy while it was being devastated by coronavirus. Including it in the list of tax havens could be a popular countermeasure.

For Oxfam’s EU tax policy adviser Chiara Putaturo, a better condition on the corporate bailout would be “to require public country-by-country reporting, so it would be possible to see where the money goes and whether companies are engaged in tax avoidance practices.”

Currently, only tax authorities know the full breakdown of where multinationals pay their taxes.

“Making these country-by-country reports public would increase pressure from shareholders and the public to unwind corporate structures through tax havens,” Faccio said, “just like happened with the banks after the financial crisis.”

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