Attack, or in this case, counterattack is the best defense. This is what Italian politicians probably thought when they appealed to European solidarity in the fight against the Corona crisis and its consequences via an advertisement in the Frankfurter Allgemeine Zeitung FAZ at the end of March and at the same time made serious accusations against the Netherlands. The Netherlands would use its tax system to deprive European countries of tax revenue. This is at the expense of the social systems and the weakest citizens in the other European countries most affected by the corona crisis.
Aggressive Tax Policy
The criticism of Dutch tax policy is not new, but has not yet been widely publicized. In the reports of the so-called” European semesters”, in which the EU Commission analyses the economic development of the member states every year, the Netherlands has repeatedly been accused of an” aggressive tax policy”. In the latest “Semester” certificate of February this year, the EU Commission has again made the accusation.
The commission identifies a whole series of critical points on which the criticism from Italy can be based. With 15,000 letterbox companies, the country has become the world’s second most important location for these less transparent companies, behind Luxembourg. Their total assets amounted to 4,500 billion euros, six times the Dutch economic strength. Half of all letterbox companies in the world are located in the Netherlands and Luxembourg.
Numerous multinationals choose the Netherlands as a stopover for the transfer of dividends, interest payments and Royalties to tax havens.
Behind it is a System called” Double-Irish with a Dutch Sandwich”. “Irish” and “Dutch” for the prominent role that Ireland and the Netherlands play in this System. At the beginning and end of the Sandwich construction are Irish companies or subsidiaries of globally operating corporations. One is based in Ireland, the other in a low-tax country such as Bermuda. In between is a branch in the Netherlands.
The company in Ireland would have to pay a withholding tax for the direct transfer of its profits to the tax haven - but not for the Transfer to an EU country. The Netherlands offers itself as a transit station because it is one of the few EU countries that does not levy withholding tax on remittances abroad. Leading global corporations from Google to Amazon, Apple, Facebook, Starbucks and European companies such as IKEA have been actively using the system, benefiting from record-low tax rates.
Netherlands in top group of non-transparent financial centres
Years ago, the International Monetary Fund noted that the Netherlands played a crucial role in international tax avoidance. The non-governmental organisation “Tax justice network”, which specialises in tax issues, assesses the importance of this even more than before. In its recently published Financial Secrecy Index 2020, the country is now ranked eighth. Two years ago it was ranked 14th. Of the European countries, only Switzerland, Luxembourg and indirectly via the Cayman Islands of Great Britain are considered less transparent.
The Netherlands has adopted some tax reforms with withholding taxes. Whether they will have the desired effects, however, is uncertain, says the “Semester"report of the EU Commission. Even in the Netherlands itself, doubts are raised again and again. The most recent example is a lawsuit against the originally Argentine oil company Pluspetrol, which has its headquarters in Amsterdam in the form of a letterbox company. Pluspetrol was sued at the National contact point for compliance with the OECD guidelines for multinational companies. The reasons are the opaque tax practices and the environmental damage that the company is doing in Peru. The Dutch non-governmental organisation Centre for Research on Multinational Corporation SOMO, which is complicit in the lawsuit, contends that the complex-nested corporate structure makes it possible to divert profits via Luxembourg to the Bahamas tax haven. In doing so, the company violated the OECD code of conduct on taxes and transparency.
The tax avoidance accusations obviously make little impression on the Dutch government. In the conference call of the euro finance ministers on the night of 7-8 April, she still made Corona aid commitments subject to strict conditions. Governments claiming bailout funds should be prepared to undertake “growth-promoting” reforms on a country-by-country basis. However, the division between North and South in the euro area threatens to deepen.