The Scottish government has voted to prevent companies and individuals registered in tax havens from getting any government financial support to help them recover from the health pandemic.

Basically, if you haven’t been paying in, you’re not getting a payout. Companies and individuals register in tax havens in order to avoid paying UK tax. And there is a strong feeling that this isn’t fair. We all pay income tax, National Insurance Contributions, VAT, Corporation tax and any other taxes we’re liable for. So, if we need support from the collective pot, that’s fine.

To many, it seems like adding insult to injury for those that don’t to then claim government support.

Scotland joins Wales, Argentina, Belgium, Denmark, France and Poland who all have COIVD-19 support schemes with similar eligibility criteria.

Who will be affected?

In Scotland, this new rule applies to individuals and companies that are registered in any of the EU blacklisted tax havens. It also affects subsidiaries of companies that are based offshore.

What will they miss out on?

Scotland have established a ‘resilience fund’ of £120 million. SMEs can apply for grants from this fund. They have also set aside £30 million to help companies that can’t get business rates relief in the hospitality, creative and tourism industries.

Wales have set aside an economic resilience fund of £500 million. The Welsh finance minister, Rebecca Evans said “We have put in place the most generous business support package in the whole of the UK. It is only right that businesses which are not contributing tax payments to our economy should not benefit from this scheme.”

Are there any problems with this new rule?

Some massive multinationals may still be able to claim this government support because not all tax havens are included on the EU blacklist. For example, the British Virgin Islands, Jersey, the Netherlands and Switzerland are not on the list. Yet they are famous tax havens.

The Green Party proposed another amendment which would have required the application for grants to include ‘country-by-country reporting within company accounts. This was voted down in the Scottish Parliament and does not form part of the tax haven ruling.

The tax justice movement have campaigned for this to be standard practice in all company financial reports because it would increase transparency around the global movement of companies’ profits and reduce the potential for international tax avoidance.

Alex Cobham, Tax Justice Network’s chief executive, told the Independent: “The EU tax-haven blacklist, which Scotland and other European countries are relying on to stop Covid-19 bailouts from ending up in tax havens, is based on an old-fashioned notion of tax havens as small, palm-fringed islands and ignores the reality of modern-day tax havenry. Many of the biggest corporate tax havens are based right here in Europe.”

Overall, a positive move

Whilst more can always be done, Scotland’s political parties broadly agree with their new ruling.

The Scottish Green Party co-leader, Partick Harvie said: “Any company which avoids its responsibility to contribute to society should not be getting handouts when things go wrong. That’s why many European nations and Wales have already made this commitment.

“I’m delighted that ministers finally saw sense on this basic issue of fairness. This move isn’t the final word, but it marks the beginning of a new approach to tackling the companies which shamelessly avoid paying tax, and we will continue to build on what’s been achieved today.”