Denmark: No aid for companies which pay out dividends or are reg. in tax havens • Hacker News Board

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#171

Post by freeone3000 » Mon, Apr 20, 2020, 4:22 PM UTC

londons_explore wrote: post #75

kilo_bravo_3 wrote: post #28

Earlier quoted context omitted.

There's a lot of misinformation about this out there. The article does a bad job at explaining it, but companies that take aid cannot pay dividends or buy back stock until they return the aid. This is so that aid is not redirected into the pockets of shareholders and is instead used to keep people employed. >The Government and all parties to the Parliament agree that the extended and extended fixed cost scheme introd…

So why don't these conditions apply to all the aid, not just the aid after 8.8 million dollars? Otherwise it seems ripe for my company to claim 7 million dollars of aid as unsecured loans, then pay out nice big dividends claiming you are in a strong financial position because you are forecasting lots of business next year, then in 2 years time when the loan repayments become due, go bankrupt.

Because most companies want to exist longer than two years.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#172

Post by drsim » Mon, Apr 20, 2020, 4:22 PM UTC

ThomPete wrote: post #154

flexie wrote: post #84

Danish lawyer here. The proposal only limits payments to companies that have received more than DKK 60 million (around EUR 8 million) in aid. So this is not your usual business owner. These are generally larger companies with a well paid management. As for companies registered in tax havens, the EU has made an official list of tax havens, which will be followed: https://en.wikipedia.org/wiki/European_Union_tax_haven_…

Denmark is a tax haven itself though.

I strongly doubt it. The corporate tax provisions are stricter than most developed economies. All indexes I've seen have Denmark pretty far down tax haven friendliness. Genuinely curious on your source.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#173

Post by caseysoftware » Mon, Apr 20, 2020, 4:23 PM UTC

flexie wrote: post #84

Danish lawyer here. The proposal only limits payments to companies that have received more than DKK 60 million (around EUR 8 million) in aid. So this is not your usual business owner. These are generally larger companies with a well paid management. As for companies registered in tax havens, the EU has made an official list of tax havens, which will be followed: https://en.wikipedia.org/wiki/European_Union_tax_haven_…

> The government should take a small ownership stake in companies that receive that kind of money.

I'm only familiar with US law, not Danish so question for you here.

Under US law, when a company closes (bankruptcy, acquired, etc), the common shareholders are last in line for payments after debt holders and preferred shareholders. Does Danish law have a similar provision?

If so, wouldn't being a debtor be a stronger position? Especially since the governments get to set repayment terms.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#174

Post by klyrs » Mon, Apr 20, 2020, 4:25 PM UTC

kleiba wrote: post #157

oconnor663 wrote: post #133

Earlier quoted context omitted.

> Why should tax payers bail out a tax avoiding company? I think that depends on our answer to the prior question, "Why should tax payers bail out any company?" If the answer is "because we like them and we feel a patriotic/moral/righteous duty to help them", then the distinction between tax-paying and tax-avoiding companies does seem relevant. But if the answer is "to help workers keep their jobs", then the distinct…

There is some truth to that line of thought. Either it is legal to avoid taxes, then no distinction should be made. Or it is illegal, in which they should be persecuted. But making this distinction as a means to "punish" certain companies seems to conflate two unrelated issues.

Bailouts are a reward. Not getting a reward is not a punishment.

If you buy a lottery ticket and win, your neighbor was not punished for not buying a ticket.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#175

Post by moron4hire » Mon, Apr 20, 2020, 4:25 PM UTC

hkeide wrote: post #74

moron4hire wrote: post #55

Earlier quoted context omitted.

>> mechanisms for enriching shareholders It's important to point out that "shareholders" could include "managed retirement plans", especially when talking about stocks that pay dividends.

Old people own stuff. Why is that important in this context?

Gee, I don't know, I guess I'm concerned that retired people don't get their major source of living income ripped out from under them just because of an ill-conceived notion that "dividends are only for rich people".

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#176

Post by markus_zhang » Mon, Apr 20, 2020, 4:25 PM UTC

flexie wrote: post #84

Danish lawyer here. The proposal only limits payments to companies that have received more than DKK 60 million (around EUR 8 million) in aid. So this is not your usual business owner. These are generally larger companies with a well paid management. As for companies registered in tax havens, the EU has made an official list of tax havens, which will be followed: https://en.wikipedia.org/wiki/European_Union_tax_haven_…

I totally agree with you, especially the last point. Not only that, any company that has an excessive amount of cash or cash-like securities (e.g. Apple) should not receive state-aid. Of course Apple is not asking but it's just an example. We should further limit the salary of management once they receive aid.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#177

Post by simongray » Mon, Apr 20, 2020, 4:25 PM UTC

ThomPete wrote: post #154

flexie wrote: post #84

Danish lawyer here. The proposal only limits payments to companies that have received more than DKK 60 million (around EUR 8 million) in aid. So this is not your usual business owner. These are generally larger companies with a well paid management. As for companies registered in tax havens, the EU has made an official list of tax havens, which will be followed: https://en.wikipedia.org/wiki/European_Union_tax_haven_…

Denmark is a tax haven itself though.

You're thinking of the Netherlands where the Dutch live (https://en.wikipedia.org/wiki/Dutch_Sandwich).

Denmark is a different country, but they're often confused for one another by Americans.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#178

Post by toast0 » Mon, Apr 20, 2020, 4:26 PM UTC

AnthonyMouse wrote: post #109

Saaster wrote: post #27

It's a good common sense start. Companies that pay dividends or make share buy-backs are more vulnerable in a crisis (not only the current one), meaning they are riskier investments. Risk needs to be inversely correlated with reward for the markets to function. Investors in riskier companies deserve to get wiped out, not propped up. Companies registered in tax-havens should have no business applying for EU or US aid.…

The notion that we should be encouraging corporations to hoard money is crazy. We have enough problems with them doing that as it is, because executives already have a perverse incentive to retain earnings for pet projects and wasteful empire building, and there are a bunch of dumb tax rules that already allow taxes to be avoided as long as the money isn't repatriated and paid out to shareholders, which makes the sha…

> there are a bunch of dumb tax rules that already allow taxes to be avoided as long as the money isn't repatriated

I think that was just in the US; but the Trump tax changes got rid of global taxes on US companies, payable on repatriation and replaced it with essentially a minimum tax on global income, payable immediately, but credited by foreign taxes paid; plus a different rate on US income.

IIRC, the global minimum rate is about 10%, and the US rate is about 20%, and there's probably some progressivity, so those are the top marginal rates, but this isn't tax advice.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#179

Post by Saaster » Mon, Apr 20, 2020, 4:26 PM UTC

NovemberWhiskey wrote: post #127

Saaster wrote: post #27

It's a good common sense start. Companies that pay dividends or make share buy-backs are more vulnerable in a crisis (not only the current one), meaning they are riskier investments. Risk needs to be inversely correlated with reward for the markets to function. Investors in riskier companies deserve to get wiped out, not propped up. Companies registered in tax-havens should have no business applying for EU or US aid.…

> Companies that pay dividends or make share buy-backs are more vulnerable in a crisis (not only the current one), meaning they are riskier investments. You present that as a statement of fact; but it's not at all clear to me why that should be true. Can you give your thinking on that? A company may not be paying a dividend because it's reinvesting; or because it's unable to do so because it's making a loss. Do you t…

Companies that intentionally run with razor-thin balance sheets and don't have any buffers built in to withstand shocks, are more fragile than companies with some buffer, all other things being equal.

If the company chooses to pay out said buffer as dividends, it's to the benefit of shareholders. That's completely fine, market working as intended! But they shouldn't then be able to turn around and get state aid because the lack of said buffer now makes their company non-viable, at least not without restrictions like the Danes are imposing (no future dividends). To do otherwise incentivizes creating these fragile bufferless companies, and puts companies that do have a buffer at a competitive disadvantage.

What Denmark is doing, is saying you can get some aid to help your company, but going forward you must pay us (the society who supports you) back before you pay your investors. Unfortunately the dividend restriction period is capped at two years, while it should really be for an indefinite time.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#180

Post by NovemberWhiskey » Mon, Apr 20, 2020, 4:28 PM UTC

_se wrote: post #158

NovemberWhiskey wrote: post #153

Earlier quoted context omitted.

> You are correct that the vast majority of publicly traded companies do not pay dividends. How many stocks in the S&P 500 pay no dividends?

418 pay dividends.

Right, and I believe roughly half of the Russell 3000 constituents pay dividends as well. Given that the Russell 3000 represents about 98% of all U.S. equity market capitalization, is there a sense in which the statement:

> You are correct that the vast majority of publicly traded companies do not pay dividends.

... is usefully true?