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Law360 (May 14, 2020, 1:47 PM EDT) -- The German-based airline Lufthansa published information on tax havens where it has subsidiary companies in a bid to assuage critics who question whether the company should have access to funds that public authorities have made available during the COVID-19 pandemic.
The airline said Tuesday that it was publishing its list to answer questions that had emerged about the company's activities in jurisdictions the European Union has labeled tax havens. The controversy came as European countries adopted legislation stating that companies with activities in tax havens aren't eligible for state aid packages to help companies survive the economic shutdowns imposed to stop COVID-19, the respiratory disease caused by the novel coronavirus.
Lufthansa, the German flag carrier, is currently in negotiations with the German government over a possible €9 billion ($9.7 billion) aid package.
"All companies operating in countries on this list are companies with operational business" such as meal production and logistical services for local airlines and airports, according to a Lufthansa release issued Tuesday.
"As a global company, the Lufthansa Group is represented in a large number of countries either by itself or through its subsidiaries," the company said. "Naturally, national and international legal and tax regulations are observed in all countries in which the Lufthansa Group operates."
The release explained that Lufthansa has subsidiaries in Panama that employ 500 staff members. It also has subsidiaries in Guam that employ 186. Furthermore, the company has a partly owned subsidiary in the Cayman Islands and U.S. Virgin Islands that employs 134 staff members. All those jurisdictions are listed on the EU's most recent list of noncooperative jurisdictions on tax matters.
The airline was reacting to criticism from some German politicians who questioned Lufthansa's use of tax havens. The co-chairman of Germany's Social Democratic Party or SPD, Norbert Walter-Borjans, was quoted in Der Spiegel magazine as saying that there must be clear conditions for a company getting state aid and that an explanation was warranted as to why Lufthansa had activities in tax havens.
The SPD didn't have an immediate response to a request for comment.
Germany's Finance Ministry, headed by Olaf Scholz of the SPD, declined to comment, citing a policy of not commenting on individual companies.
Lufthansa's publication of its activities in tax havens isn't sufficient in the eyes of some tax transparency advocates.
Chiara Putaturo, a tax policy adviser with the charity Oxfam, told Law360 that publishing the number of employees active in a particular jurisdiction "is not enough to say if there is real economy activity, and this is why our first ask for corporate bailout is to require the publication of the country-by-country reporting." She said this would also include information such as revenues, profit and taxes paid, which would allow observers to determine if these are "disproportional" to the number of employees.
The Organization for Economic Cooperation and Development has recommended country-by-country reporting of income and taxes by multinational companies as part of its base erosion and profit shifting project. The OECD, though, has resisted calls to compel companies to make such information public.
Asked to provide more information on Lufthansa's list, a spokesman, Helmut Tolksdorf, told Law360 that "all companies in those states are part of the LSG Group, the catering company within the Lufthansa Group."
"As a matter of principle, LSG Group does not provide information on sales or earnings at local or regional level," Tolksdorf said.
Scholz, the German finance minister, said Monday that companies that "evade their duty" to pay taxes in Germany had no claim to state support. Belgium, Denmark, France and Poland have all introduced legislation to block aid to companies operating in tax havens. Recently a group of British lawmakers called for similar action in Britain.
--Editing by Robert Rudinger.
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