Scotland bans firms based in tax havens from using coronavirus funds

Scotland bans companies based in tax havens from using millions of pounds in coronavirus relief funding

  • MSPs approved measures after they were put forward by the Scottish Greens 
  • Scottish Government has provided funds including £120million for businesses
  • The legislation follows a similar move by the Welsh government last week 
  • Here’s how to help people impacted by Covid-19

The Scottish parliament has voted to ban companies which are based in tax havens from using millions of pounds’ worth of coronavirus relief funding.

MSPs approved the move on Wednesday night after measures were put forward by the Scottish Greens. 

It means firms or individuals who are registered in tax havens, or are a subsidiary of an offshore company, will not be able to get support grants. 

The measures could prevent such firms from applying to a £120million fund for small and medium-sized businesses and a £30million fund for firms in the creative, tourism and hospitality industries which cannot get business rate relief. 

The Scottish parliament has voted to ban companies which are based in tax havens from using millions of pounds’ worth of coronavirus relief funding. Pictured: The British Crown dependency of Jersey, a popular destination for businesses seeking to avoid paying tax

The legislation follows a similar move by the Welsh government last week and several EU member states, including Denmark, France and Poland, in April. 

The measures were backed by the Conservatives and the governing Scottish National Party. 

Patrick Harvie, the Scottish Green party co-leader, told The Guardian: ‘Any company which avoids its responsibility to contribute to society should not be getting handouts when things go wrong. That’s why many European nations and Wales have already made this commitment.

‘I’m delighted that ministers finally saw sense on this basic issue of fairness. 

‘This move isn’t the final word, but it marks the beginning of a new approach to tackling the companies which shamelessly avoid paying tax, and we will continue to build on what’s been achieved today.’ 

MSPs approved the move on Wednesday night after measures were put forward by the Scottish Greens. Patrick Harvie, the Scottish Green party co-leader, said any firm which ‘avoids its responsibility to contribute to society’ should not be ‘getting handouts when things go wrong’

On May 15, the Welsh government blocked companies whose headquarters were based in tax havens from accessing its £500m fund for firms affected by the coronavirus pandemic and lockdown.  

It followed a move by the French government in April to ban companies either registered or with controlling subsidiaries in tax havens from benefiting from a €110 billion rescue package.

French Finance Minister Bruno Le Maire old France Info radio, ‘It goes without saying that if a company has its tax headquarters or subsidiaries in a tax haven, I want to say with great force, it will not be able to benefit from state financial aid.

Le Maire added: ‘There are rules that must be followed. If you have benefited from the state treasury, you cannot pay dividends and you cannot buy back shares.’

‘And if your head office is located in a tax haven, it is obvious that you cannot benefit from public support.’

The UK, along with the Netherlands, Switzerland and Luxembourg has provisions making it attractive to businesses that also allow them to be registered offshore.

The legislation means firms or individuals who are registered in tax havens, or are a subsidiary of an offshore company, will not be able to get support grants. Pictured: The British Virgin Islands, a popular tax haven

Last year, the UK was branded the world’s biggest sponsor of tax avoidance by pressure group the Tax Justice Network.

They 64 countries based on how much tax avoidance they enabled, taking into account the size of their economies.

Topping the list was the British Virgin Islands, followed by Bermuda and the Cayman Islands – all British overseas territories. 

Jersey, a Crown dependency, was seventh. The UK itself was ranked 13th. 

The index scores each country’s system based on the degree to which it enables corporate tax avoidance combined with the scale of its corporate activity to determine the share of global corporate activity put at risk of tax avoidance by the country.  

The network said that through its network of satellite jurisdictions, the UK bears the lion’s share of responsibility for the ‘breakdown of the global corporate tax system’.

It added: ‘The UK with its corporate tax haven network is by far the world’s greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system, accounting for over a third of the world’s corporate tax avoidance risks.

‘That’s four times more than the next greatest contributor of corporate tax avoidance risks, the Netherlands, which accounts for less than seven per cent.’

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