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Law360, London (April 23, 2020, 2:26 PM BST) -- France will become the third European Union country to adopt a law banning COVID-19 state aid relief to companies registered in tax havens, after an amendment to the country's emergency pandemic measures was passed into law Thursday.
The French Senate adopted an amendment on Wednesday to the finance bill, which provides loans and grants to companies dealing with the impact of the coronavirus-related economic meltdown, blocking access to the aid to companies that are registered in tax havens.
The draft was passed into law by the committee of seven members of the French lower chamber and seven from the Senate.
Poland and Denmark have adopted similar provisions to ensure that the massive amount of financial assistance being granted to companies to help them deal with the economic hardship resulting from the Europe's lockdown efforts does not end up in tax havens.
The wording of the French amendment says that it is not acceptable for companies registered in tax havens to benefit from state-backed loans and guarantees. It points out that similar measures have been adopted in other European countries.
But the text is not clear on the definition of tax haven.
The Danish amendment specifically mentions that it defines tax havens as those companies registered in countries on the so-called European Union blacklist. But the French government maintains its own list of countries that it considers to be tax havens — and the two lists are not identical.
The EU list of tax havens consists of the Cayman Islands, Palau, Seychelles, Panama, American Samoa, Fiji, Guam, Samoa, Oman, Trinidad and Tobago, Vanuatu and the U.S. Virgin Islands. Registering in any of these jurisdictions, which have low or no businesses taxes, enables a company to avoid paying taxes to the country where it actually operates.
The French list is part of France's anti-fraud law. It incorporates the countries on the EU tax blacklist and now includes Anguilla, the Bahamas, Fiji, Guam, the British Virgin Islands, the US Virgin Islands, Oman, Panama, Samoa, American Samoa, the Seychelles, Trinidad and Tobago and Vanuatu.
Speaking to French media Thursday, French finance minister Bruno Le Maire said that it "goes without saying" that companies with headquarters or subsidiaries in tax havens will not be able to benefit from financial aid from the state.
"There are rules that must be followed. If you have benefited from the state, you cannot pay dividends and you cannot buy back shares," Le Maire said, "The state is not there to finance shareholders."
The list does not go far enough, despite being a good signal, Quentin Parrinello, senior tax policy officer at Oxfam in France said.
"Eighty percent of corporate tax dodging in France goes to EU tax havens," Parrinello said. "Only 52 companies could be subject to the rule, providing they actually resort to state support. This shows the limitations of the current list."
--Editing by Ed Harris.
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