With Netherlands cracking down on tax evasion, UK risks increasing isolation
Dutch ‘Teflon Premier’ Mark Rutte has once again managed to hang on to his job following a scandal over childcare benefits, early elections and a vote of no confidence. What may not have survived the political turmoil, however, is Rutte’s notoriously business-friendly disposition. Barely two years ago, the Dutch Prime Minister leaned back to prevent Anglo-Dutch company Unilever from moving its headquarters to London, even suggesting removing the country’s dividend tax.
Rutte, however, sensed a shift in the prevailing winds of public opinion. the Fourth Biggest Catalyst for Corporate Tax Abuse Finally Takes Interim Steps to Reform Low Tax Country reputationâFrom judicial inquiries into Dutch-registered holding companies which may serve as vectors of tax evasion, to new legislation aimed at closing down Dutch loopholes that multinationals have long enjoyed.
It remains to be seen how far the overhaul will go, but one thing is certain: the more cooperative the Netherlands is on tax matters, the greater the pressure will be on the UK – including the overseas territories of the islands. British virgins, the Caymans, and Bermuda share the highest rungs of global tax havens with the Netherlands – to follow suit.
The Netherlands raises questions
Individuals and companies that have long benefited from the business-friendly nature of the Netherlands are now coming under scrutiny. Former executives of ABN Amro and ING, two Dutch banks investigating revealed had contributed to the creation of dozens of companies in offshore tax havens, are both under investigation by the Dutch authorities. Just this week Chris Vogelzang to leave his post as CEO of Danske Bank after being involved in a Dutch investigation into ABN Amro, while Dutch prosecutors recently open a criminal investigation against UBS chief Ralph Hamers for failing to crack down on money laundering while at the head of ING.
Amsterdam courts, meanwhile, are looking into the business activities of Dutch-registered company TAF Asset 1, to which Nerijus Numa, Lithuania’s richest man, is said to have transferred â¬ 26m. “For tax reasons”. Although Numa has denied any wrongdoing, this is not the first time that companies controlled by the Lithuanian billionaire, who hidden much of its wealth in well-known tax havens, including the Netherlands and Luxembourg, has been embroiled in controversy. The Vilniaus Prekyba holding, which controls some of the largest supermarket and shopping mall chains in the Baltic states, was probe by the Lithuanian authorities on allegations of tax evasion and large-scale fraud. By the time the investigation was finally dropped, Numa had already decamped to become a UK tax resident, a decision which raised questions about the UK-Lithuania Double Tax Avoidance Treaty. .
It’s no surprise that Numa has taken refuge in the favorable tax policies that the UK and the Netherlands have long championed. Countries around the world pass on around $ 22 billion in revenue each year due to corporate tax evasion in the Netherlands, while the UK and its overseas territories alone are responsible for 42% of tax revenue lost globally due to corporate and personal tax evasion.
However, these recent examples illustrate that the UK and the Netherlands are finally moving in opposite directions on tax matters. While Brexit Britain is stubbornly resist publishing country-by-country data on taxes and the business activities of large multinational companies, the Netherlands finally seems ready to abandon its label of tax haven.
Historically, Dutch policymakers have been notoriously unwilling to confront the problem, and Dutch MPs have on more than one occasion, rejected motions to recognize the country as a tax haven. Public opinion in the Netherlands, however, has continued to deteriorate over the loopholes and tricks that multinational companies, including Google and Uber, have used to reduce their tax liability.
Some companies have in particular delighted the fires of public discontent, such as Booking.com, domiciled in Amsterdam. The hotel reservation company pays almost no tax in the Netherlands. A report revealed that she had avoid some 715 million euros in taxes between 2012 and 2016 – yet asked the Dutch government to relieve the coronaviruses, scar park general public outcry.
What future for tax breaks and loopholes
Rutte’s administration finally seems to be listening. The Dutch government recently submitted a bill recommending the introduction of a 25% conditional dividend withholding tax – a move to ensure that the Netherlands is no longer used as a transfer jurisdiction for companies registered in low tax jurisdictions other measures to thwart multinationals who use Dutch loopholes to reduce their tax liability.
While this first consultation aims to eliminate double taxation through transfer pricing, a second will seek to implement Dutch tax rules for so-called reverse hybrid entities that will be subject to corporate tax from January. 2022. Dutch lawmaker Bart Snels, for his part, is forming a multi-party coalition to propose an âexit taxâ which would be imposed on large companies leaving the Netherlands to settle in cheaper tax regimes. In practice, this plan, which would in practice impose a royalty of 11 billion euros on Unilever for the consolidation of its headquarters in London – a far cry from the time when Rutte Free remove the 15% Dutch withholding tax on dividends in order to maintain Unilever’s favor.
The UK, however, is moving in the opposite direction. UK Overseas Territories, which already top the global tax haven ranking, risk becoming even more tax evasion facilitators now than they are any more constrained by the EU Code of Conduct on Business Taxation – it is no coincidence that in the first month following the UK’s official exit from the European Union, the Isle of Man seen tenfold increase in the number of people seeking to settle on the island with extremely low tax rates. the establishment a number of special tax zones across England have raised concerns that the mainland UK is joining its overseas territories as a hub for tax evasion of all stripes. It is a position that only seems more backward as the Netherlands finally begins to crack down on the practice.