'Dutch sandwich' tax loophole looks set to be closed
12 Apr 2013
A motion calling for the closure of legitimate tax loopholes used by multinationals to reduce their tax bills by using Netherlands-based 'letter box' companies, has been passed by the Dutch government.
It means that the shell companies used by global giants such as Google and Starbucks to shift profits made outside the country into Dutch 'PO Box' firms and then back outside the EU to lower tax jurisdictions, could now be taxed.
The successful motion, proposed by Jesse Klaver, a Groenelinks (GreenLeft) MP, secured enough support from Dutch Labour, Socialist and Democrat parties on Tuesday to compel the government to deliver an 'action programme' by June 2013. It aims to 'stop multinational companies using the Netherlands as a tax haven to avoid taxes in other countries', a Groenelinks spokesman confirmed.
But leading Dutch accounting academic, Joost van Buuren of Nyenrode Business School, says that while the passing of the motion was significant, the country needed to wait for the publication of a report from the Dutch secretary of state into the size of the Netherland's tax subsidiary market.
It is expected to be published before the end of April.
Van Buuren said: 'While many in the Labour Party will say that this is an important issue for them, in the end I think we will have to wait to see what is in the report before we know what action will be taken. There are so many other political issues surrounding it that it makes it very difficult to predict what will be done.
'It's likely that this has grown significantly since then and the report will update it to at least its 2011 levels.'
The former E&Y employee stressed that while the government would inevitably aim to tackle the worst elements of abuse, 'there needs to be a level playing field' across the European tax landscape, as any unilateral Dutch action would be akin to 'shooting themselves in the foot'.
Currently, the 'Dutch sandwich' global tax planning industry is worth billions to the Dutch economy generating around £1.5bn in taxes and revenues from the businesses servicing these 'PO-box' companies - around 0.3% of Dutch GDP.
Earlier this year, Dutch Labour party members criticised the Netherland's tax haven status for multinationals with the country's finance ministry saying it was willing to have a 'better audit of tax treatments of multinationals', but the country as a whole would 'not be willing to let all this money go'.
'There's a lot at stake here and a lot of jobs have been created for Dutch lawyers and accountants through these tax laws.'
There are around 23,500 multinational companies headquartered in the Netherlands, which benefit from favourable tax rates.
Both search engine giant, Google and computer behemoth, Dell use the Netherlands' tax laws to reduce their tax bills.
A recent Bloomberg report, which cited the Dutch Central Bank, showed that in 2010 multinational companies passed £8.7trn through 14,300 Dutch 'special financial units'.