Brussels this Tuesday asked the member states of the European Union not to grant financial support to companies with connections to tax havens. In a note released today, the European Commission argues that the recommendation “aims to provide Member States with a model, consistent with EU law, on how to prevent public support from being used for tax fraud, evasion and avoidance purposes, for the money laundering or to finance terrorism “.
In this regard, the Commission states that “companies with links to jurisdictions that are on the EU list of uncooperative tax jurisdictions (for example, companies resident in those jurisdictions for tax purposes) should not benefit from public support”.
In Portugal, this exception was included in the Supplementary Budget for 2020, based on proposals from the Left Block, the PCP, the Greens and the non-registered deputy Joacine Katar Moreira. The supplementary OE dictates that “companies and entities with fiscal headquarters in countries, territories and regions with privileged taxation regimes are excluded from access to public support created under the exceptional and temporary measures to respond to the covid-19 pandemic”.
Impact assessed over three yearsBut there are countries that are not part of the exception. Therefore, Brussels is “ready to discuss its specific plans with the Member States to ensure that the granting of state aid, in particular in the form of recapitalizations, is limited to companies that pay their share of taxes. “.
Cited in the note, the European competition official, Margrethe Vestager, underlines that, in the context of the pandemic, “it is not acceptable for companies that benefit from public support to participate in tax avoidance practices involving tax havens”, as this “would be a use abuse of national and EU budgets “.
Paolo Gentiloni, European Commissioner for Economy, reinforces the need to protect public funds, “so that they can truly support honest taxpayers across the EU.
Exceptions to the restrictions are still allowed, “in order to protect honest taxpayers”. The Commission’s note gives an example of a company that “even though it has connections” to tax havens, but that “can prove that it has paid adequate taxes in the Member State during a certain period (for example, the last three years) or that have a genuine economic presence in the country on the list “, you should be able to continue receiving support.
In the same recommendation, the European Commission further argues that state support should also not be granted to companies “that have been convicted of serious financial crimes, including, among others, financial fraud, corruption, non-compliance with tax and social security obligations” .
The European Commission asks Member States to inform Brussels about the measures they intend to take to comply with the recommendation. The impact of this recommendation will be assessed in a report, within three years.