Sunday 05 December 2021

More transparency needed to tackle tax evasion via the Netherlands

The Netherlands remains an attractive place for companies and criminals to avoid tax and to hide cash by using shell companies, despite efforts to tackle the problem, a government commission said on Monday.

The current situation both damages the reputation of the Netherlands and generates little economically, the commission said and urged the government to take further action.

‘It will still be a couple of years before we know what the influence of earlier changes will be,’ said commission chairman Bernard ter Haar. ‘But we can see that the Netherlands remains a major player and the movement [of money] through the Netherlands has not been reduced.’

In 2019, the Netherlands was home to some 12,400 letter box companies, with a value of €4,500bn – some 5.5 times GDP.

The commission estimates that shell companies have created just 3,000 to 4,000 jobs and account for less than 1% of the country’s tax income. Instead, multinationals and their tax advisors have been the main beneficiaries, the commission said.

The commission is recommending the government take steps to increase transparency, expand supervision and require more in-depth financial reporting by the shell companies concerned.

In particular, changes to the register of ultimate beneficial owners (UBO) will make it clear who is hiding behind companies, the commission said.

Tax minister Hans Vijlbrief said in a reaction that the cabinet will continue to play a proactive role in improving the international tax regime but that it will be up to the next government to decide whether or not to put the commission’s recommendations into practice.

Ranking

NGO Tax Justice Network said earlier this year the Netherlands remains an important location for tax evasion, with only the British Virgin islands, the Cayman Islands and Bermuda playing a greater role helping multinational corporations pay less tax.

In particular, gaps in Dutch legislation which allowed interest, royalties and dividends to be transferred elsewhere, and the way multinationals can offset losses booked in another jurisdiction, are behind the Netherlands high position on the list, the report said.

This summer, Australia-based tax research institute Cictar published another report which showed taxi and meal delivery giant Uber shifted $5.8bn through 50 or so shell companies in the Netherlands in 2019 after creating a massive tax shelter.

The finance ministry, however, claims the outgoing cabinet has made major advances in eliminating tax evasion, and points to new rules covering interest and royalties and more changes that are being made in 2024.

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