Former chancellor John McDonnell has called on the government to use the coronavirus crisis as an opportunity to clamp down on tax avoidance firms and reshape the post-crisis economy.
France followed in the footsteps of Denmark and Poland this week by blocking firms registered in offshore tax havens from claiming aid from its government bailout.
Finance Minister Bruno Le Maire said that “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 from state financial aid.
“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.”
Reshaping the post-crisis economy
McDonnell said the British government should follow suit in a bid to reshape the post-crisis economy.
Last year groundbreaking research found Britain was by far the biggest enabler of global corporate tax dodging.
Of the top 10 countries allowing multinationals to avoid paying billions in tax on their profits, four are British overseas territories.
We can start reshaping the post crisis economy now by demanding no company using tax havens should receive any government bailout assistance until they demonstrate to HMRC they they are ending this practice. #SayNotoTaxDodgers https://t.co/jnPgrKKr6k
— John McDonnell MP (@johnmcdonnellMP) April 24, 2020
An index published by the Tax Justice Network found that the UK has “single-handedly” done the most to break down the global corporate tax system which loses an estimated $500bn (£395bn) to avoidance.
The amount dodged globally each year is more than three times the NHS budget or roughly equivalent to the entire Gross Domestic Product (GDP) of Belgium.
Closing loopholes
There is growing suspicion that coronavirus could be unwittingly helping to block common tax evasion practices.
“Mind and matter” laws could be called into question because of the lockdown, meaning directors can’t travel to havens such as Jersey or Bermuda.
David Sefton argued this week that HMRC should “shake off the Stockholm syndrome of being captive to the fantasy logic of the offshore tax avoidance industry and instead take a realistic look at these companies”.
Covid-19 could present a rare opportunity to use the powers to “look at the substance of how these companies operate”, he said.
Related: UK could see deepest economic slump for several centuries, Bank of England says
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