
Denmark: No aid for companies which pay out dividends or are reg. in tax havens - sebazzz
https://www.bloomberg.com/news/articles/2020-04-18/denmark-extends-business-aid-to-increase-spending-by-15-billion
======
dang
This submission broke HN's rules by editorializing the title. Doing that
eventually causes your account to lose submission privileges on HN, so please
don't do that.

" _Please use the original title, unless it is misleading or linkbait; don 't
editorialize._"

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

Cherry-picking a detail from an article and making that the title is
editorializing—in fact it's the leading form of editorializing. Titles are by
far the biggest influence on threads, so this is a big deal. On HN, being the
first to submit an article doesn't confer any special rights to frame it for
everybody else.

If you want to say what you think is important about an article, please do so
in a comment. Then your view is on a level playing field with everyone else's.
[https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...](https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20%22level%20playing%20field%22&sort=byDate&type=comment)

~~~
Sammi
What if the cherry picked detail is the interesting detail worth discussing on
hn?

~~~
sebazzz
Yes, this was my reasoning. The most interesting thing of the article was the
explanation why some companies wouldn't be eligible for aid - the fact that
Denmark offers more aid isn't interesting, countries do that all the time now.
However, excluding companies which use tax havens or pay out dividends is new.

Besides, editorializing is expressing an opinion, which is not something this
title is doing - or am I seeing this wrong?

------
flexie
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_black...](https://en.wikipedia.org/wiki/European_Union_tax_haven_blacklist)

It's a short list and it doesn't include any countries where a large company
doing business in Denmark would be registered except if they try to avoid
taxes. Why should tax payers bail out a tax avoiding company?

The proposal was made by a party in the opposition, which is usually seen as
most business friendly ("Venstre"). Interest groups representing the
businesses in Denmark support the proposal. I think it's a common sense
proposal. Paying out dividends to shareholders while receiving government aid
basically means having the tax payers bail out the business owners.

I honestly think the proposal should go even further. The government should
take a small ownership stake in companies that receive that kind of money.

~~~
oconnor663
> 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 distinction might not be
relevant.

~~~
komali2
The government has unilateral ability to _invent_ jobs and even _invent money_
if the goal is to help workers keep their jobs and/or remain fed and housed.
So I feel that no company should get a bailout. If they fail, they fail, and
the government can scoop up the workers and create an agency or just
government-staked company that does the same thing, find some work in the
country that needs doing and put the workers on it, or stipend the workers
until they find a new job.

Of course, that means the failed company's executive board has to also find a
way to actually add value...

~~~
jmckib
The government can invent jobs, but it can't invent infinite jobs that
accomplish something that people want, and even when it can the task won't
generally be accomplished as efficiently as a private company would. It's also
very difficult to remove a government agency once one is created. Government
has all kinds of incentive problems that private companies don't, so generally
(IMO) it's best to only use government to accomplish a task that the private
sector does very poorly because of some market failure.

There's also a large cost to having people reallocate from one job to another,
and from having businesses go under. There's physical capital that needs to be
reallocated and "organizational" capital (not sure the right word, but I mean
the way the business is organized) that may be permanently lost.

~~~
malandrew
On top of organizational capital, you're also losing tacit knowledge when a
business dissolves.

------
Saaster
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. I would say, simply barring them doesn't go far enough. If one did
apply while being simultaneously registered in the EU/US and any tax haven,
that is fraud and should result in jail time.

~~~
tonyedgecombe
_Companies that pay dividends_

What’s the point of a company that never pays a dividend.

~~~
wsc981
The stock value can still rise. Apple didn't pay dividends for a large part of
its existence, yet especially after the year 2000 it would have been a great
stock to own.

> _Apple 's long stretch of not paying any dividends reflected Jobs'
> opposition to them. During Jobs' second tenure at Apple from 1997 to 2012,
> the tech giant didn't pay a single dividend, even as its cash hoard
> ballooned to over $50 billion in 2011.

"The cash in the bank gives us tremendous security and flexibility," Jobs said
in 2010.

But by 2012, and after Jobs had passed the reigns to Tim Cook, Apple finally
reinitiated its dividend, making it the company's first dividend since 1995.
The combination of Jobs' passing in 2011 and a cash hoard exceeding $100
billion in 2012 marked the beginning of a new era for Apple. Overnight, Apple
became a formidable dividend stock -- and it looks like it's going to stay
this way._

Source: [https://www.fool.com/investing/2016/08/29/apple-dividend-
his...](https://www.fool.com/investing/2016/08/29/apple-dividend-history-yup-
the-tech-giant-is-offic.aspx)

~~~
Mikeb85
Literally the point of markets is for companies to eventually pay back
investors. A market without buybacks or dividends is a ponzi scheme.

~~~
MiroF
So many people who don't understand this.

------
Nextgrid
Maybe I'm not understanding something but why do they consider paying
dividends as something bad? They are essentially excluding the majority of
businesses using this criteria.

~~~
kilo_bravo_3
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 introduces a condition in the Compensation Orders
that applicants, as a condition of receiving compensation for the extended
period, must declare by faith and laws, that the companies will not pay
dividends or buy back shares for the financial years 2020 and 2021. The
condition will apply to companies that receive more than DKK 60 million. in
compensation in 2020 in the compensation scheme for fixed costs. Companies
will later be able to free themselves from these restrictions by repaying paid
aid under this scheme in excess of DKK 60 million.

Translated from:
[https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regering...](https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regeringen-
og-alle-folketingets-partier-er-enige-om-at-justere-og-udvide-hjaelpepakker-
til-dansk-oekonomi)

DKK 60 million is about 8.8 million dollars.

If you have money to pay dividends, you have money to pay back your government
aid.

~~~
londons_explore
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.

~~~
freeone3000
Because most companies want to exist longer than two years.

~~~
nerdponx
Bankruptcy does not mean the company dissolves.

------
Ididntdothis
That seems pretty reasonable to me. Bailout money should come with very
unattractive conditions so companies use it only as last resort.

------
mjul
The article lacks some details. If you read the Danish text detailing this
from the Ministry of Commerce you will see that:

Regarding buy-backs and dividends, companies receiving more than 60 million
DKK in subsidy for fixed costs have to promise no buy-backs and dividends in
fiscal years 2020 and 2021. If they pay back the subsidy they will be freed
from this obligation.

60 million DKK is approximately 8.7 million USD or 8 million EUR.

Regarding "tax havens", the legislation states that the companies receiving
these subsidies have to pay their taxes according to national rules and
international agreements. Companies based in EU-defined "tax havens" will not
be eligible for compensation unless denying them compensation would violate EU
legislation or other international agreements.

You can read the press release and legislation from the Ministry of Commerce
in Danish here:

[https://em.dk/nyhedsarkiv/2020/april/covid-19-regeringen-
og-...](https://em.dk/nyhedsarkiv/2020/april/covid-19-regeringen-og-alle-
folketingets-partier-er-enige-om-at-justere-og-udvide-hjaelpepakker-til-dansk-
oekonomi/)

------
bythckr
> registered in tax havens won’t be eligible for any of the aid programs

This just common sense, wonder why its not the standard.

------
crazygringo
I understand the sentiment behind no aid if you're paying dividends (if you
have enough money for dividends then you clearly don't need aid), but I don't
see how it can be defined in any way that seems even remotely fair.

Is it whether you paid dividends recently in the past? Because remember
businesses are _supposed_ to pay dividends -- and you could have been
profitable enough to pay a dividend in January but now deep in losses -- and
whether they paid dividends in any particular recent timeframe can be fairly
arbitrary.

And if it means being prohibited from paying dividends for a period of time
going forwards, this seems similarly arbitrary -- basically any business can
just pause dividends, then as soon as the time period expires, and immediately
or gradually pay the previous dividends they didn't.

Coming up with any useful definition for whether a company deserves aid or
not, short of whether they're actually filing for bankruptcy, is already
incredibly difficult, but basing it on dividends is beyond simplistic.
Different types of businesses have such wildly different patterns of savings
and cash flows they're extremely hard to compare or draw any kind of line
between "responsible" and "irresponsible" companies.

~~~
0xffff2
Based on the article, it looks like the primary form of aid is zero interest
loans. It seems perfectly fair and reasonable to me that you can't pay
dividends until you pay back the loan.

------
chrismeller
> The government also said that companies which pay out dividends, buy back
> own shares or are registered in tax havens won’t be eligible for any of the
> aid programs...

Well first off, dividends are a normal method for business owners to make an
income... they take all the risk, but reap some limited rewards by taking
dividends rather than a salary.

Buying back shares I’m fine with. While that could actually be seen as a form
of “reinvesting”, I get the point.

What sense does the “registered in tax havens” part make though? If they’re a
foreign-registered company would they ever have been eligible for aid? Plenty
of companies in Europe are employing thousands of people, but are “owned” by a
company elsewhere, so how do we define that ownership and “tax haven”?

~~~
toomuchtodo
Dividend and share buybacks are the same end result, just different mechanisms
for enriching shareholders.

If you didn’t keep enough cash on hand (because you were shoveling profits out
the door), you lose your ownership interest (insolvency with no bailout).

These are very reasonable conditions for a nation state bailout.

~~~
moron4hire
>> 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.

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

~~~
moron4hire
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".

------
1cvmask
Why doesn’t the government just write a check to individuals and let them
spend the money instead of bailing out companies in most countries?

~~~
ajross
One rational reason is that there's a desire to preserve the state of the
economy to speed the eventual recovery. Writing checks to a restaurant to keep
its staff employed (but idle) vs. writing checks to the employees is the same
from the perspective of the employees. But it also means the restaurant is
going to fail.

Opening the doors of an idle restaurant at the end of the lockdown is a lot
cheaper and more efficient than starting up an entirely new one.

A less rational reason, of course, is that the policymakers writing the
bailout laws tend personally to be more affiliated with and sympathetic to
business owners than employees. There is some of that too.

------
LatteLazy
Leaving aside the misleading title...

I hate crappy poorly thought out measures like this.

Is this a loan? If so, no dividends should be paid (or buybacks offered) until
it's repaid. Otherwise companies just need to hold fire for 18m and it's free
money!?

And if it is a loan, there should be interest and compulsory payments after
(say) 6 months. Otherwise you're bailing out companies that SHOULD go bankrupt
and penalizing ones that don't.

This is like when my country (the UK) bailed out banks. We got equity in
exchange (smart). Then we decided to ban bonuses because politics. So we got
sued and lost and had to pay them and legal costs. Then we said no more
bonuses, so the good bankers, the ones that made a profit and who were not
involved in the BS mortgage crap all moved to private banks. And we were left
with hollow shells of companies we'd paid a fortune for.

------
tidon12
I find these restrictions relatively frustrating because they push governments
into an adversarial relationship with shareholders in a way that is
unnecessary.

We may not like it much, but government equity purchases are a much more
aligned way to pursue a bailout. World governments (and by proxy taxpayers)
should be gaining ownership or preferred rights in these deals. Then
shareholders could be free to do whatever ridiculous dividend / buyback policy
they want. Putting time limited bans on corporate payouts doesn't fix the
incentives that lead to high payout rates in the first place. Shareholders
losing 80% of their equity in a bailout would.

------
lazyjones
Seems like this will not affect companies that funnel profits into
subsidiaries in low tax countries, e.g. the Maltese Patent Box scheme.

There are always some loopholes, governments should know.

------
benatkin
It could be sanity prevailing, or it could be they're counting in the US to
foot the bill for international conglomerates their economy depends on.

------
bryanrasmussen
Denmarks Radio guide on the different help packages
[https://www.dr.dk/nyheder/penge/dr-guider-gennem-junglen-
af-...](https://www.dr.dk/nyheder/penge/dr-guider-gennem-junglen-af-
hjaelpepakker-saadan-sikrer-du-stoette-til-din-corona)

in Danish of course.

------
gfodor
The dividend rule is dumb. Companies who pay out dividends are actually more
responsible businesses, who return capital to shareholders. Just because they
generate profits doesn’t mean they are also not in need of aid to maintain
operations. Certainly it makes sense to prevent them from issuing future
dividends based on aid, but why a businesses ability to return profits to
shareholders implies anything about their cash flows sensitivity to covid is
beyond me. Not to mention, this rule will give aid to profitable companies who
chose to not return those profits to shareholders, an additional bizarre
distinction.

That’s not to say bailout money shouldn’t be restricted, it just seems like a
dumb rule. Why not delimit it based upon a company’s behavior, such as
excessive risk taking or over leverage? The companies that were not anywhere
near robust to financial shocks deserve to die, but dividend issuance seems a
poor way to select for these.

~~~
nemetroid
> Certainly it makes sense to prevent them from issuing future dividends based
> on aid

...which is exactly what the rule is about, see the press release from the
Danish Ministry of Finance:

[https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regering...](https://www.fm.dk/nyheder/pressemeddelelser/2020/04/regeringen-
og-alle-folketingets-partier-er-enige-om-at-justere-og-udvide-hjaelpepakker-
til-dansk-oekonomi)

> Regeringen og alle Folketingets partier enige om, at der i den forlængede og
> udvidede ordning for faste omkostninger, indføres en betingelse i
> kompensations-bekendtgørelserne om, at ansøgende virksomheder som en
> forudsætning for at modtage kompensation i den forlængede periode på tro og
> love skal erklære, at virksomhederne ikke vil udbetale udbytte eller
> foretage aktietilbagekøb for regnskabsårene 2020 og 2021. Betingelsen vil
> gælde for virksomheder, der modtager mere end 60 mio. kr. i kompensation i
> 2020 i kompensationsordningen for faste omkostninger. Virksomheder vil
> senere kunne frigøre sig fra disse begrænsninger ved at tilbagebetale
> udbetalt støtte efter denne ordning ud over 60 mio. kr.

------
throwawaysea
Isn't paying out a dividend similar to just paying employees and those who
should rightfully earn an income from any enterprise? I understand the need
for meaningful checks and controls here, but why would this be singled out?

------
s_dev
Danes obviously remember getting burned from the bailouts of bankers in 2008.

------
yalogin
I keep saying over and over but the economic policy is something trump fucked
up big time. He gave away the corporate tax breaks in times of prosperity when
there was no need and the companies just made bank. He was dealt a great hand,
a strong economy that would chug along no matter who the president was. Those
are the times to focus on the poor and lift people up. Instead he wasted his
opportunity on the tax cuts. Someone with foresight and common sense would
have saved that arrow in the quiver for a more opportune time. Now would have
been a great time to use that tool. Instead the fed has to resort to unlimited
money printing and zero interest. We probably will need to do that at some
point but losing that one option is a mistake.

~~~
ericmason
Trump cut taxes on corporate profits. That only helps when there are actually
profits, so it would not do much right now.

~~~
sleepychu
Right but to cut tax you either need to be in a budget surplus, reduce your
budget size or enter a budget deficit.

If you do that in January then you can't use the same money again in February
when things are bad.

~~~
RockIslandLine
Currency issuers are not revenue constrained. For a nation with a fiat
currency, the ability to spend is distinct from the need to tax.

------
pjdemers
Stocks that never pay dividends are technically worthless. Because a stock's
value is the net present value of all future dividends.

------
alfor
Is delaware a tax haven ?

~~~
aw1621107
It's not on the EU list of tax havens, so it's not a haven in the eyes of
Denmark's aid programs.

------
ThomPete
The irony of this is that Denmark is kind of a tax haven for international
holding companies that can be tax-free.

~~~
simongray
It's only ironic if you're prone to mixing up nationalities.

1\. Denmark is a country in Scandinavia where they speak _Danish_. It's not a
tax haven and it is _not_ the country where they speak Dutch.

2\. That country is called the Netherlands and _that_ country has a tax
evasion scheme named after it:
[https://en.wikipedia.org/wiki/Dutch_Sandwich](https://en.wikipedia.org/wiki/Dutch_Sandwich)

~~~
ThomPete
I am Danish, I think I'll manage to know the difference between the country I
was born and raised in and the country were a lot of my friends are from.

Denmark is a tax haven for holding companies.

~~~
simongray
And I am Danish too. If Denmark is indeed a tax haven it should be fairly easy
for you to document that, right?

~~~
ThomPete
Read the sources I posted elsewhere. It's a well known secret of most people
who know a little about tax in Denmark.

