Companies’ Dividend Tax Lobbying Puts Dutch PM Under Pressure

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By Linda A. Thompson

Dutch Prime Minister Mark Rutte is under pressure from opposition lawmakers to identify the companies that persuaded him to abolish the country’s 15 percent dividend withholding tax.

The call to identify the companies from Green Party leader Jesse Klaver came during a Nov. 2 plenary debate in the House of Representatives, as Rutte strongly defended the incoming government’s decision to lower business taxes, warning that millions of jobs relied on the country’s ability to attract large, foreign companies.

Noting that he had in recent years talked to many companies, Rutte stressed that tax rates simply are a factor in large companies’ decision-making process in choosing an investment location, in addition to, for instance, the state of a country’s infrastructure and quality of its education system and airports.

“I’m sorry to say so, but the crude consideration of the tax burden is ultimately also relevant,” he said, adding that as a small, open economy, Netherlands would always need to offer lower headline rates than neighboring, larger countries like Germany and France.

Rutte’s remarks prompted lawmakers to insist on the details of the companies he had discussions with—Klaver called on the prime minister to submit documentation to the House identifying the corporations that impressed on him the need to scrap the tax, which is expected to reward foreign companies with tax savings of 1.4 billion euros ($1.6 billion) according to a government analysis of the budgetary impact of the measures. “I want the names of the companies that asked for a 1.4 billion-euro gift from this prime minister,” said Klaver.

Together with the three other parties that make up the new Dutch government—the Christian Democratic Appeal (CDA), the liberal-democratic D66 and the Christian-democratic ChristenUnie—Rutte’s pro-business party VVD announced a corporate tax reduction from 25 to 21 percent in an Oct. 10 ruling agreement.

Scrapping the country’s 15 percent withholding tax on dividend distributions is expected to mostly benefit foreign investors with shares in Dutch companies.

Benefit for Foreign Countries

The government unit that assesses the impact of current and future government policies, the CPB Netherlands Bureau for Economic Policy Analysis, noted in its review of the new government’s ruling agreement that abolition of the dividend withholding tax would benefit foreign countries and that it “thus hardly presents earn-back effects,” or return-on-investment effects.

“If this is about employment, the dividend tax has no effect on this,” said Klaver, pointing out that most resident multinational companies are Dutch corporations, and that most Dutch citizens are employed by SMEs. “This isn’t advancing our economy. This is advancing US investors.”

“No-one in the House suggested this; no-one in the CPB Bureau suggested this; no economist suggested this. Behold the power of the powerful lobby of multinationals,” said Emile Roemer, the Socialist Party leader.

Klaver said he would submit a motion at the end of the plenary debate calling on the government to disclose the names of the companies that convinced Rutte of the urgency to abolish the country’s dividend withholding tax.

Defending Ruling Agreement

Before coming under pressure to reveal the names of corporations he spoke to, Rutte told lawmakers that the Netherlands must “care for” its resident multinational corporations because the jobs of potentially millions of ordinary Dutch people depend are at stake.

Since announcing the ruling agreement, the new cabinet has been heavily criticized by lawmakers on the left for passing out “gifts” to foreign corporations while increasing the country’s low VAT rate, applicable to many household goods, from 6 to 9 percent—a measure critics say will hit hard-working citizens extra hard.

“The multinationals in the Netherlands that are so often talked about in disparaging terms as big earners” account for 40 percent of private employment, two-thirds of resident companies’ turnover and 80 percent of international trade, he said. Rutte described the rate reduction as a non-partisan choice because of the “tens of thousands, hundreds of thousands, potentially millions of jobs” at stake.

“It is of public interest that we care for the large companies that are based here in the Netherlands, and the companies that want to come to the Netherlands,” he said, adding that the fate of many resident small and mid-sized companies is also tied up with that of large corporations because they supply them.

To contact the reporter on this story: Linda A. Thompson in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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