Wednesday, April 21, 2021

France excludes companies registered in tax havens from COVID-19 funds


France follows the path of Denmark, by excluding from public aid the companies present in tax havens. The Minister of Economy and Finance, Bruno Le Maire, announced this Thursday:  “It goes without saying that if a company has its tax headquarters or subsidiaries in a tax haven, […] it will not be able to benefit State cash aid ”, he decided on France Info.

The debate was raised this week in the Senate, where amendments to this effect were adopted. Finally, these amendments were not included in the text resulting from the compromise between deputies and senators on the amending budget. But since the measure is regulatory, not legislative, it may still apply.

The cash aid concerned

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This exclusion is reminiscent of the rule laid down for dividends, according to which companies supported by the State will have to repay the aid if they pay dividends to their shareholders. As with dividends, this restriction linked to the presence in tax havens will concern cash aid, namely the deferral of charges and loans guaranteed by the State, but not the use of short-time working.

It will apply to the French list of non-cooperative states and territories (ETNC). Last updated in January 2020, the French list includes thirteen states or territories, including the Bahamas, Panama, the British Virgin Islands and Seychelles. Since then, the EU has adjusted its blacklist to include the Cayman Islands. According to a provision of the fraud law, France must review its list once a year to incorporate updates from the European Union.

According to Vincent Vicard, a researcher at Cepii, there are 52 French groups present in the non-cooperative territories listed by France, according to the Orbis database. “If we add the Cayman Islands, six more groups would be affected,” he said. A spokesperson in Bercy specifies that this provision applies  “if the presence in the tax haven is not justified by a real economic activity”.

Note that the presence of a subsidiary in these jurisdictions already results in financial penalties in France, which involve high withholding taxes (75%) on financial flows, or exclusion from the mother-daughter regime.

“Important symbolism”

“It is an important symbolism to say that companies which make tax evasion are excluded from state aid”, reacts Quentin Parrinello, head of advocacy within the NGO Oxfam. He underlines that this measure faces the same difficulties as the European blacklist of tax havens. It has been criticized for not integrating European states, even though tax evasion comes in part from states located within the EU.

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Denmark is the first country to have raised the question of a restriction of public aid for companies present in tax havens. When a financial package of 100 billion crowns (around 13 billion euros) was adopted to help businesses, this initiative was endorsed by all the parties represented in Parliament.

Uncertainty remains, however, in the field of the companies concerned. If it is only a question of companies having their seat in a tax haven, the measure would have far less scope than in France.

Original article


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