Survival of the Richest

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Netherlands “The Netherlands used to be part of the problem, too often enabling countries to avoid paying taxes. Now it is time we, as EU President, are part of the solution.” Jeroen Dijsselbloem Dutch Finance Minister, August 2016 567 Overview The Netherlands continues to be a key player in international tax avoidance strategies. Between 2013 and 2015, the number of letterbox companies in the Netherlands grew by 17 per cent. 568 The Panama Papers contained references to approximately 200 Dutch addresses, 50 Dutch intermediaries, and 100 entities affiliated to the Netherlands, which the government is investigating. 569 As EU President in 2016, the Netherlands has had a major role in finalizing the EU Anti-Tax Avoidance Package. While these policy measures are welcomed as means to combat tax avoidance, the Dutch State Secretary for Finance also announced that in light of these measures, the Netherlands will lower its corporate income tax rate in order to preserve the attractiveness of its “fiscal business climate”. 570 Meanwhile, analysis of documents obtained under a Freedom of Information request by Oxfam Novib and SOMO expose the influence of corporate interests on Dutch fiscal policy. 571 The documents show that the Dutch employers’ organization (VNO-NCW), as well as the American Chamber of Commerce and the Dutch Association of Tax Advisers were all closely involved in several policymaking processes. They were able to effectively lobby the Ministry and represent their business interests. A parliamentary inquiry on “undesired international fiscal planning via The Netherlands” is scheduled to be held in December. 572 The inquiry was initiated by the Greens, the Labour Party, and the Socialist Party, in light of the developments around the Panama Papers, LuxLeaks and the investigations by the European Commission into state support to Starbucks, Apple and Ikea. Parliament will invite letterbox companies, 573 tax advisors and the supervising authorities, who cannot refuse to attend and will be heard under oath. An expert meeting was already held by Parliament in September to inform Members of Parliament about the role of the Netherlands in international fiscal constructions. The government in May 2016 also published a law proposal to strengthen oversight of the country’s trust offices (“trustkantoren”), a term used in The Netherlands for corporate service providers. The proposal includes better integrity checks and stricter policy to combat money laundering. 574 However, it is problematic that the trust offices will still have a so-called ‘gatekeeper’ function regarding the thousands of letterbox companies under their management. This means that the supervisor of the trust sector, the Dutch Central Bank, will not directly monitor the risks associated with those letterbox companies. The law will come into force in 2018. 575 Transparency Public country by country reporting Earlier this year, the Dutch Parliament adopted two motions calling on the government to support full and public country by country reporting within the EU. 576 In a letter by the Minister of Justice sent to Parliament in October 2016, the Dutch government has acknowledged the importance of full public country by country reporting for multinational corporations with a presence in the EU, and is generally in favor. However, the Ministry also emphasises doubts about legal possibilities to enforce publication of CBCR data for non-EU countries by EU subsidiaries and branches of multinationals headquartered outside the EU. Therefore the NL government favours a "comply or explain" approach for the separate reporting per non-EU country. 577 Ownership transparency The Dutch government is in the process of preparing legislation for an Ultimate Beneficial Ownership (UBO) register. The plans are not yet finalized but the Ministry of Finance says it will follow the measures laid out in the EU’s 4th Anti-Money Laundering Directive and make the register public. 578 The register will include corporate partnerships and other legal entities. The register will not include trusts (trusts here meaning trust funds), because “there are no trusts which are governed by Dutch law”. 579 Beneficial ownership is defined as the natural person who has formal or factual control over a legal entity. Indications for control are a ‘sufficient’ degree of ownership or shares in the entity, but also the power to fire board members can indicate beneficial ownership. 80 • Survival of the Richest
Netherlands One of the most crucial aspects of the government’s proposal is who will be able to get access to which information and how. While the register will be public, the Dutch government has proposed two restrictions, which it argues will ensure the “privacy” of the UBO´s: 1) The registration of the users of the registry; 2) a fee for the use of the registry. The government has also suggested that only the minimum set of data will be made available in the public register, and when there is a risk of kidnapping or blackmailing in individual cases, UBO data will be shielded from the public registry (and in the case of minors). Only specific authorities (such as the Dutch Central Bank, public prosecutor, etc.) will gain unlimited access, which includes information on the address of the beneficial owner and his or her Tax Identification Number (TIN). Others will only be able to access the name, year and month of birth, nationality, country of residence and the nature and size of the economic interest of the UBO. 580 The Dutch Chamber of Commerce, which will be administering the registry, is currently not registering company information according to an open data format, and an open data format is currently not foreseen in the future. 581 In May 2016, the Dutch Parliament adopted a motion requesting the government to take into account the importance of accessibility of the register for civil society and journalists. 582 The final outcome of the register remains uncertain at the time of writing. A publicly accessible UBO register, however, is crucial not only in the fight against tax dodging, but also money laundering. According to the 2015 Financial Secrecy Index, the Netherlands has the eighth highest level of financial secrecy out of the 18 countries included in this report (ranked at number 41 at the global level). 583 Taxation Tax treaties The Netherlands, which in total has some 90 bilateral tax treaties, is known to be used for treaty shopping using Dutch letterbox companies. 584 Corporations resident in other countries and thus not entitled to Dutch treaty benefits set up a Dutch letterbox to benefit from, amongst others, lower withholding tax rates in countries of operation. This enables them to shift profits out of the countries where business activity is taking place, via the Netherlands to tax havens. This Dutch conduit arrangement is facilitated by domestic tax laws, such as the participation exemption and lack of withholding taxes on outgoing royalty, interest and most dividend payments, even if these are made to tax havens. Recognising that treaty shopping is incoherent with development goals, 585 the Netherlands announced in 2013 that it will propose including anti-abuse provisions in its tax treaties with 23 developing countries. All 23 countries have now been approached and so far five treaties have been changed to include anti-abuse rules (Ethiopia, Zambia, Kenya, Malawi and Ghana). The government is in talks with seven other countries. 586 The government claims that, when it comes to developing countries, it is more willing than in other cases to accept taxation measures benefiting the source country, such as higher withholding tax rates at source. 587 Yet research by ActionAid found that the Netherlands currently has seven tax treaties with developing countries that are 'very restrictive', and impose significant restrictions on the corporate tax collection in the developing countries that sign them. 588 In total, the Netherlands has 44 tax treaties with developing countries, which is slightly above average among the countries covered in this report (42 treaties). The average rate of reduction of tax rates within those treaties – 4 percentage points – is also above average (3.8 percentage points). 589 Harmful tax practices As mentioned above, the Dutch letterbox system remains an issue of high concern. Furthermore, corporate tax rulings constitute another potentially harmful aspect of the Dutch tax system. Through these rulings, companies can negotiate with the Dutch government the terms on which they will be taxed while they are in the Netherlands. As mentioned in in the chapter on 'Sweetheart deals', these type of agreements were the center of the so-called LuxLeaks scandal, and can be used by multinational corporations to avoid taxes. They remain a secret to the general public as well as Parliament. The total number of advance pricing agreements and advance tax rulings in 2015 came to 642, compared to 632 in 2014 and 669 in 2013. 590 In 2015, the European Commission ordered the Netherlands to claim back €20 to €30 million in tax from Starbucks, after the Netherlands, in the view of the Commission, gave the company an unfair advantage as part of an advance pricing agreement. 591 The Dutch government has appealed the decision. According to the Ministry of Finance, the same tax provisions apply to taxpayers with and without a tax ruling; they do not benefit one tax payer over the other. 592 A recent study commissioned by the European Commission found the Netherlands to have the highest number of harmful tax practices in the EU. Out of 33 indicators, the Netherlands scored 17. 593 Three of these are active indicators, namely the patent box, the excess profit rulings scheme and the fact that tax deductions are allowed for interest cost without corresponding adjustment. Survival of the Richest • 81
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Survival of the Richest Europe’s
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Glossary Advance Pricing Agreement
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Glossary Tax treaty A legal agreeme
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Executive summary Global solutions
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Global developments 2016 Developing
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Page 51 and 52: Recommendations 7. All EU countries
Page 53 and 54: Austria Taxation Tax treaties Austr
Page 55 and 56: Belgium Taxation Tax treaties In to
Page 57 and 58: Belgium Global solutions Belgium di
Page 59 and 60: Czech Republic According to the 201
Page 61 and 62: Denmark Taxation Tax treaties Tax t
Page 63 and 64: Finland Ownership transparency Finl
Page 65 and 66: France “Of course, the fight agai
Page 67 and 68: France Taxation Tax treaties In tot
Page 69 and 70: Germany In July 2016, the European
Page 71 and 72: Ireland Furthermore, it should be n
Page 73 and 74: Italy “After our meeting in Milan
Page 75 and 76: Latvia “We still have a high inco
Page 77 and 78: Latvia Global solutions The Latvian
Page 79: Luxembourg One Luxembourg newspaper
Page 83 and 84: Norway Overview Once the Panama Pap
Page 85 and 86: Poland “It seems to us that those
Page 87 and 88: Slovenia In May 2016, the Financial
Page 89 and 90: Slovenia Global solutions Despite p
Page 91 and 92: Spain Taxation Tax treaties The Spa
Page 93 and 94: Sweden Taxation Global solutions Ta
Page 95 and 96: United Kingdom Anti-Corruption Summ
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