The Dutch government’s most important advisory body on new legislation has criticised a plan to effectively fine multinationals which leave the Netherlands to compensate the treasury for lost tax income.

The Council of State, which is required by law to assess all draft laws, said the plan, drawn up by opposition party GroenLinks, could fall foul of EU taxation rules.

The council said it recognised there is ongoing debate about tax and multinationals and that governments are free to amend legislation to take this into account. However, the council said, ‘this legislation should not conflict with higher law, such as international treaties and EU rules’.

The draft legislation as presented did not meet this requirement, and the likelihood of it being upheld in court of law is so small that introducing an exit tax would not be responsible, the council said.

The legislation follows a decision by Anglo Dutch company to consolidate its operations in Britain, where there is no tax on dividends. Unilever has said that the measure would cost it €11bn, and could force a rethink about the removal plans.

The proposal, if it becomes law, will introduce an exit premium which large companies leaving for a zero dividend tax country would have pay as compensation for tax income lost to the Netherlands by the move.

The draft bill is due to be debated by MPs in the autumn and is supported by three of the four coalition parties.

GroenLinks MP Bart Snels, who drew up the legislation, said he thinks the plan, which he has amended since the original publication, can still go ahead. ‘I think it wrong that companies take such big decisions purely to avoid dividend tax,’ he told broadcaster NOS.