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.
Foto: T24 In the Czech Republic it might be argued that some companies are both more Czech, and more equal, than others. For while two decades ago the idea of Czech companies being registered abroad or based in some sun-kissed tax havens might have appeared absurd, the reality is that more and more local firms have and are now going down that road.
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 EZ, or the Agrofert agricultural conglomerate of Minister of Finance Andrej Babi, expressly underline their upstanding tax contributions in their corporate information.
Zdenk Bakala, photo: YouTube Some of the others, the likes of the PPF company of the Czech Republics richest man Petr Kellner; the KKCG empire of oil and gas magnate Karel Komrek, and BXR Group of Zdenk Bakala, have taken another route. In fact, all three have significant parts of the business empires based in the Netherlands. And in the case of Komrek, while some of his companies have gone Dutch the main mother company is based in Cyprus, a location which often boasts of its bank and corporate secrecy.
Photo: Radio Prague According to a survey carried out by the Bisnode consultancy at the end of September last year, the Netherlands tops the league of destinations for Czech companies to relocate outside their homeland with 4,222 firms now registered there. Cyprus comes second with almost 2,100 firms and then Luxembourg third with just over 1,100. Then come a series of more exotic paradise locations such as the Seychelles, British Virgin Islands, and Panama. Altogether, its estimated that around 13,000 Czech companies are registered in what might be described as tax havens.
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.
The Netherlands, photo: Alphathon, Wikimedia CC BY-SA 3.0 Lets perhaps have a look at the Dutch example first. On basic tax rates, companies pay 20 percent, or a higher 25 percent rate, in the Netherlands and 19 percent in the Czech Republic. So on normal grounds the Netherlands cannot be regarded as a tax haven.
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.
There are obviously both push and pull factors working here. Vladimra Chsk is chairwoman of the Czech Dutch Chamber of Commerce and sees things from both sides of the fence so to speak as a Czech promoting business links with the Netherlands.
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, its 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, its 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.
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Czech companies seek benefits of tax havens and foreign locations