Dutch to crack down on tax loopholes exploited by multinational firms


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The Independent Online

The Netherlands is beginning to clamp down on legal loopholes that allow multinationals such as Google and Starbucks to slash their tax bills by routing money through Dutch subsidiaries.

Following international pressure from the G20 and the OECD, the Dutch Labour party (PvDA) is preparing to tax "letter-box" companies, which are registered in the Netherlands and used to funnel profits made outside the country via Dutch shell firms to outside the European Union, bypassing higher tax jurisdictions.

Jesse Klaver, MP for Groenelinks, who proposed the motion, told The Independent: "This is a victory for all citizens who have to deal with a deep crisis while the big multinationals manage to avoid their taxes. The Netherlands helps the largest and most powerful companies in the world to avoid taxes. I am very glad that after years we will now start putting an end to these unfair advantages for multinationals."

About €8trn (£7trn) a year passes through the Netherlands. Ninety-one multinationals, including Apple, Yahoo, Microsoft, Google, Gazprom and Wal-Mart, were identified by the Dutch newspaper De Volkskrant as companies channelling money via the Netherlands. The investigation found €57bn funnelled through the Netherlands, paying effective tax rates of between just 0 to 5 per cent in 2011.

The US coffee giant Starbucks last year admitted to British MPs that it has cut its tax bill in UK and other countries in part by making royalties payments to its Netherlands regional office, reducing the profits taxable in the original country. The move saw it pay about 16 per cent tax in the Netherlands and US on the royalties, against UK rates of 24 per cent or more.

Even rock stars such as David Bowie, U2 and the Rolling Stones are believed to have taken advantage of low or zero Dutch tax rates on royalties by registering companies there.

Dell, meanwhile, is reported to be paying 0.10 per cent in profits in tax having used the "Dutch sandwich" method of being registered in the US while using the Netherlands as its financial base.

The Ars Technica news website reported that Google moved $10bn (£7bn) from Ireland via the Netherlands to Bermuda in December 2012.

Edward Groot, a PvDA member of parliament and the party spokesperson for taxation and fiscal affairs, told The Independent that while the government did not intend to penalise companies legitimately working within the Netherlands, "where it is clear that international treaties are being misused and [causing] clear injustice, we should take action.

"We wish to keep our international reputation high, we will not be breaking our treaties.

"Companies are most welcome [in the Netherlands], most have substantial activities here. A free flow of capital is important. But profits made in the Netherlands should be taxed in the Netherlands, and other profits should be taxed where they are made.

"The PvDA is not aiming to tax capital flows; capital flows can have many good reasons. But you are right that profits should be taxed where they are generated."

John Christensen from the Tax Justice Network told The Independent: "We welcome these changes, but what is needed is necessary is a more rational way of taxing multinational companies [MNCs].

"The risk is that MNCs will substitute Ireland for the Netherlands.

"What is needed is rules at a global level to stop MNCs using conduit nations to avoid their share of tax."