As countries across Europe consider measures to help businesses struggling as a result of the COVID-19 pandemic, the European Commission has today urged EU members not to provide support to companies with links to countries that are on the EU's list of non-cooperative tax jurisdictions.

The body also said restrictions should apply to companies that have been convicted of serious financial crimes, including financial fraud, corruption, non-payment of tax and social security obligations.

Safeguards

The commission said its recommendation was aimed at providing guidance to countries on how to set conditions that would prevent the misuse of public funds and to strengthen safeguards against tax abuse throughout the EU.

Commissioner Margrethe Vestager (pictured), who is in charge of EU competition policy, said “exceptional volumes” of state aid were being granted to firms in the context of the pandemic.

“Especially in this context, it is not acceptable that companies benefiting from public support engage in tax avoidance practices involving tax havens,” she said.

Restrictions

The commission said several EU members had already asked for guidance on the issue.

It said the EU’s list of non-cooperative tax jurisdictions was the best basis on which to apply restrictions, as it would enable all member states to act consistently and avoid individual measures that may violate EU law. It did, however, say there could be exemptions to protect honest taxpaying companies.