Tax havens move must apply across the board
If the Welsh Government has decided not to fund tax haven firms under its Economic Resilience Fund, the same standard should be applied to all the support it provides, argues Business Editor SION BARRY
THE Welsh Government has announced that firms ultimately owned by companies or individuals based in tax havens are being exempted from its coronavarius response £500 million Economic Resilience Fund.
That’s fair enough, although tax haven-owned firms in Wales do pay business rates, employer NI contributions and provide muchneeded employment too.
Where they can legally avoid tax is in the area of corporation tax, assuming of course they are profitable. This is a tax not devolved to the Welsh Government.
The Welsh Government said that the exemption applies to businesses owned by or individuals living in what it described as the 100% tax havens.
They have listed them as the Isle of Man, Turks and Caicos Islands, Anguilla, British Virgin Islands, Bermuda, Cayman Islands and the Bahamas.
Announcing the decision, Economy Minister Ken Skates said “We are facing the biggest crisis of our lifetime and being able to address the economic and health implications of this crisis comes at a considerable financial cost.
“In line with our something for something approach, I firmly believe that businesses who don’t pay tax should not benefit from the interventions we are making to try and protect our economy.
“This decision is one of the important steps the Welsh
Government is taking to build a better economy and better society for Wales.”
However, the Development Bank of Wales, which is wholly-owned and funded by the Welsh Government – alongside soon-to-expire EU funding – does invest alongside investors based in tax havens.
In a positive development it was announced earlier this week that it had led on £1.8 million investment into expanding Flintshire-based specialist cyclist insurer Bikmo.
It has invested alongside global insurer Hiscox and a number of angel investors. The growth capital will allow Bikmo to create new jobs.
While listed on the London Stock Exchange, and with numerous subsidies globally, Hiscox’s headquarters are registered in Bermuda.
It now has an equity stake in Bikmo, although a minority one. Of course Bikmo will be liable for corporation tax, if applicable, to the UK Treasury.
However, one could argue there is a degree of double standards here, in that the Welsh Government is perfectly happy for its investment bank subsidiary to invest alongside a company registered in a tax haven, but it’s a different story for supporting firms with tax haven ownership under ERF.
If the Welsh Government wants to make a principled stance against tax havens, then it should be extended to all the support it provides, whether directly or indirectly.
This should also apply whether a firm is wholly or partly owned by investors in tax havens.
While out of Welsh Government control, we also need a global agreement on tax havens and one that ensures that corporate taxes are proportionately applied to where revenues are made and not where any registered headquarters reside.
The development bank is of course a stand alone entity and makes its own investment decisions, but ultimately it comes under the responsibilities of Mr Skates.
Like with the former at arm’s length WDA, it would simply need a sort of remit letter from Mr Skates clearly stating that the development bank cannot invest alongside investors headquartered out of tax havens.
Personally, while we need a global agreement on tax havens, I am relaxed about the development bank investing alongside investors registered which are out of tax havens.
However, having made a principled stance over ERF, surely the Welsh Government should follow through and extend its exemption to all its support, and on a permanent basis.
The Welsh Government said: “The exemption for financial support, made in last week’s announcement, relates to the Welsh Government’s Economic Resilience Fund.
“The Development Bank of Wales is responsible for making its own investment decisions.
“However, we are pleased to note the development bank investing on commercial terms in a growing Welshbased SME.”