Czech companies seek benefits of tax havens and foreign locations
Tax havens and tax avoidance are a big issue at European level with rarely a week going by without some scandal about a big business earner paying a pittance in taxes with, or without, the help of certain states. Surprising as it might seem, many Czech companies have also fled from their roots to register elsewhere for fairly pragmatic tax and investment reasons and because of reasons they are not so keen to talk about.
In fact, such is the exodus of some major firms that those that have stayed behind to pay Czech tax, such as state-controlled energy giant ČEZ, or the Agrofert agricultural conglomerate of Minister of Finance Andrej Babiš, expressly underline their upstanding tax contributions in their corporate information.
The business weekly Ekonom estimated this year that the Czech state has lost out on around 200 billion crowns in tax income from dividends and perhaps around another 100 billion crowns on top of that from other taxes because of companies being based outside the country.
However, the Netherlands is a much more sophisticated tax location which does not, for example, tax dividend earnings abroad and capital gains on the sales of assets. And, in some cases, the losses made in one tax location can be used to write off the gains in another. That can mean a lot to multinational companies such as some of the Czech groups which have set up there. There is also the impression that a Dutch name plaque can help when you are looking to raise money internationally or is a better place to structure some international deals.
She says the Czech Republic is partly to blame if some of its biggest and best companies decide to take their pick from the corporate locations on show internationally. “On the other side, it’s also the problem of the Czech Republic where the system is not so developed and so controlled. And also, if you are a big company and doing business internationally you want to protect your assets and the base in the Czech Republic, it’s still doubtful whether it will be stable later on or if you have some problems. So, I think it would be important to develop the Czech and political system so that it would be more stable.”
Hana Lešenarová is a former Czech journalist who is now an associate director at the German branch of worldwide risks evaluation consultancy Control Risks. The company helps its clients get to the bottom of firms’ sometimes very murky ownership, corporate and political relations with the investigations often coming up against considerable obstacles. “In the past, there has probably been more usage of the offshore structures because of so-called other reasons such as secrecy. Also because if you were a company based elsewhere it was not usually possible to work out if you owned it, and how, and through what person, and whether you have any partners that might possibly be controversial or if maybe you wanted to hide their identity in the first place.
Pulling back a bit, tax avoidance and tax havens have now shot to the top of the agenda for many European governments and for the European Union itself, although it’s a bit of a delicate issue because many European locations such as the Isle of Man, Dutch Antilles, Malta, and Luxembourg can also be classed as tax havens. Just look for example at the scandal blown up this week about the advice given by the bank HSBC to its rich account holders about how to dodge paying their taxes. That follows on from the recent scandals about big multinationals such as Starbucks were avoiding paying taxes in Britain despite having turnover worth billions of pounds or the covert deals between some big companies and Luxembourg.
Tomáš Zdechovský is a Christian Democrat member of the European Parliament who says the move is vital not just to clamp down on tax avoidance but for other European policies as well. “I know this proposal and I am for it. For me it is very important to make these things transparent. [For example] at the moment we speak about the sanctions between the EU and Russia, but we don’t know what companies are Russian and what companies have other capital. Also, it is very important to have a transparent structure of companies and to know who is the owner and who gets the profits from the company. “