Thursday 29 October 2020

Unilever takes step closer to unification but exit tax still looms

Shareholders in the British arm of Unilever have voted overwhelmingly in favour of plans to move the company’s headquarters to London and to become a completely British company.

Last month, shareholders in the Dutch arm also voted in favour of the move, which will see Unilever end its dual structure and become, according to the company itself, a ‘a simpler company with greater strategic flexibility, that is better positioned for future success’.

However, whether or not the company actually unifies in London still depends on a plan by some political parties in The Hague to introduce an exit tax.

Draft legislation drawn up by left-wing green party GroenLinks would introduce an exit premium which multinationals leaving the Netherlands would have pay to the tax office as compensation for tax income that would be lost by the move.

In a note to shareholders in August, Unilever says such a payment would add up to €11bn and that if the legislation is passed in its present form, a move to Britain would then no longer be ‘in the best interests of Unilever, its shareholders and other stakeholders.’

However, the company also says the legality of such legislation may conflict with international treaties and Dutch-British tax arrangements.

Last week, the Council of State, which reviews all new legislation on behalf of the government also said the introduction of an exit tax would not be responsible.

EU law

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.

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.

The proposal can also count on considerable support among MPs.

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