William Malcolm

Tax Havens Losing Their Luster Among Czech Companies

Tax havens are falling out of favor among Czech companies. At the end of 2019, 12,102 Czech companies were based in offshore tax shelters, down 703 from 2018. Reaching its lowest level in nine years. 2.38 percent of Czech companies currently operate from tax havens.

The volume of equity capital of Czech companies controlled by owners from foreign tax shelters increased from CZK 326.6 billion to CZK 331.5 billion, despite the overall number of companies being smaller.

“The trend is quite clear. Tax havens are no longer sexy for Czech companies. Since 2015, they have started to withdraw, and the outflow is intensifying,” Bisnode analyst Petra Stepanova said. She added that over the past five years, the number of companies with tax haven owners has declined by a tenth.

The most significant outflow of firms from offshore tax avoidance was last year from the Netherlands (-272), the USA (-178), and Cyprus (-103). Conversely, the number of Czech firms increased in the Bermuda Islands, Hong Kong, Liechtenstein, and Malta.

Tax havens are countries with low or no taxation of foreign companies. The governments of these countries aim to attract foreign capital. According to estimates, the Czech Republic loses tens of billions of crowns a year because of offshoring. Even more damage causes money laundering and disguised crime.

Widespread knowledge and public scrutiny of offshoring and corporate tax avoidance began in the spring of 2016 when the Panama Papers affair revealed that dozens of prominent politicians and business people hide their profits in tax havens.