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The Netherlands is a top EU tax haven for corporations, an Oxfam analysis of European Commission data shows. Of 33 harmful tax practices listed by the EU executive, 17 were identified in the country currently holding the EU presidency. These findings emphasize the need for effective EU measures against tax avoidance by multinational companies – a call to action for member states’ finance ministers who meet in Brussels on Wednesday.
Oxfam’s analysis is based on the “Study on Structures of Aggressive Tax Planning and Indicators”, a report which the European Commission published in January as part of its proposal for an Anti-Tax Avoidance Package. The Commission report outlined 33 indicators of harmful tax practices allowing multinational companies to avoid tax. It then analyzed which indicators could be identified in each EU member state. However, the report did not compare member states’ respective performance on good tax governance.
Oxfam Novib, the anti-poverty organization’s Dutch affiliate, took on the task of identifying the worst offenders when it comes to facilitating corporate tax avoidance. Ranking EU member states by the number of indicators identified for each country, the Netherlands came first of the worst in this ranking with 17 indicators applicable, followed by Belgium (16 indicators) and Cyprus (15 indicators).
The long list of practices allowing companies to reduce their tax bills in the Netherlands includes the availability of so-called patent boxes: when profits are channelled through this special tax regime, taxes drop from 25% to 5%.
In addition, the Netherlands is host to more than 14,000 money-channelling (conduit) companies, most of them letterbox firms. The amounts which international companies channel through these firms – up to EUR 3.5 trillion a year – are highly disproportionate to their economic activities in the country. In 2013, 83 percent of all incoming and 78 percent of all outgoing foreign investments passed through such conduit companies (most of which are letterbox companies) in the Netherlands.
These findings come at a time when the Netherlands, holding the Council presidency, has a crucial role of leading the efforts of EU member states in tackling large-scale tax dodging. When EU finance ministers meet on Wednesday to discuss a European Anti-Tax Avoidance Directive, the Dutch worst practice example must act as a reminder that strict rules preventing tax avoidance are vital.
Oxfam’s policy advisor on tax justice, Esmé Berkhout, said:
“It is ironic to have a country that is a top EU corporate tax haven leading the bloc’s discussions on anti-tax avoidance measures. The Netherlands must back away from policies which allow big companies to dodge taxes at the expense of other EU member states and developing countries.
“Europeans are fed up with ever new tax scandals like the Panama Papers, Lux Leaks and Offshore Leaks, which have exposed how governments pander to big companies. Tomorrow’s meeting of EU finance ministers will test all governments on their willingness to finally make companies pay their fair share of tax.
“The anti-tax avoidance directive will only be effective if it delivers straight forward, easy to implement rules that target companies’ subsidiaries in tax havens. Such measures – known as CFC rules – must not give too much leeway for the implementation in member states. Otherwise, it will be impossible to prevent companies from shifting their profits into tax havens.”
Notes to editors
- “The Netherlands: a tax haven” is the English summary of an Oxfam Novib report. Read the full report in Dutch published on 12 May 2016.
- Oxfam fights for global tax justice because companies, like all of us, must pay their fair share of tax. Tax revenues are needed to support essential public services, including health care and education, both in developed and in developing countries.
- Controlled Foreign Company (CFC) rules are a crucial measure against profit shifting into low-tax jurisdictions. If the income of a company’s subsidiary abroad is taxed at a low effective rate or not taxed at all, then CFC rules apply and the tax authority of the company’s home country taxes the income of the foreign subsidiary. The main aim of CFC rules is to discourage profit shifting to tax havens which should benefit both developed and developing countries.
- In March 2015, Oxfam published “Pulling the Plug – How to stop corporate tax dodging in Europe and beyond”, a briefing note that explores ways to fight corporate tax avoidance in the European Union. It explains why it is vital for the EU to adopt legislation against tax dodging as soon as possible.
- In December 2015 and ahead of the publication of the Anti-tax avoidance directive by the European Commission, Oxfam, together with ActionAid and the EPSU, sent a letter to the Director-General for Taxation and Customs Union of the European Commission. The document outlines the organisations' position and demands regarding corporate tax avoidance and an external strategy of the EU on tax good governance.
- The “World Investment Report” of the United Nations Conference on Trade and Development (UNCTAD) estimates that developing countries lose at least US$100 billion per year in corporate tax revenue due to tax dodging by large companies.