Public bailouts to business are a central element of limiting the non-medical human and economic impacts of the pandemic. They represent major commitments of taxpayer funds; quite exceptional state interventions, in these exceptional times. In line with the exceptional nature of this state aid, exceptional conditions should also be placed on those companies receiving taxpayer funds.
The three categories that these conditions fall into are 1) effective use of aid money to protect employment 2) a high degree of company transparency to ensure that the public knows how this aid money is being used, and 3) a commitment to build back better. Bailouts should, quite deliberately, militate in favour of cleaner, less extractive, more competitive and tax-compliant markets in the post-pandemic future – instead of protecting a damaging status quo.
Expanding on these three categories, companies should be barred from distributing dividends or profits to shareholders until all aid money has been paid back and the business has returned to profitability or insolvency. Companies operating in known top tax havens – you may refer to the combined Financial Secrecy Index and Corporate Tax Haven Index list in this full article – must implement full public country-by-country reporting to account for their activities in these jurisdictions in order to qualify for aid money.
Likewise, companies previously convicted of money laundering or named in scandals such as the Panama Papers or the Cum-Ex Scandal should not be eligible for these funds as they have already shown a proclivity for fraud.
This pandemic has exacerbated, and in other cases, laid bare, many of the systemic national and international issues that have been holding back society at large. In a world fraught with rising levels of inequality and looming environmental disaster, governments have an opportunity to set the terms for those large multinational corporations that are at once such an integral part of our current global life but also a root cause to the destabilizing times we find ourselves in.
Key findings
- The Netherlands has cost EU countries $10 billion in lost corporate tax from US firms.
- Corporate tax losses were biggest among EU countries with the highest reported cases of coronavirus: France lost over $2.7 billion in corporate tax to the Netherlands, Italy and Germany both lost over $1.5 billion each and Spain lost nearly $1 billion to the Dutch tax haven.
Key recommendations
- The decision to restrict bailouts to exclude companies using tax havens should be praised and adopted by more countries around the globe.
- Companies receiving public funds must meet high standards of behaviour in terms of their use of funds to protect employment, with full labour rights protections.
- There must be a high degree of transparency, both of the ownership structure of recipients and of their tax behaviour, to facilitate full public scrutiny and accountability.
- Bailouts should, quite deliberately, militate in favour of cleaner, less extractive, more competitive and tax-compliant markets in the post-pandemic future instead of protecting a damaging status quo.
- Use the combined list of thirteen top tax havens mentioned in this report as a starting point.