Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
June 15 — State Secretary of Finance Eric Wiebes is preparing a proposal to reduce the Netherlands corporate income tax rate so as to safeguard the country's ability to attract multinational companies.
Speaking at the annual conference of the Dutch Association of Tax Advisers in Amsterdam June 14, Wiebes said international efforts to combat tax avoidance by multinationals are already having an impact on the country's appeal as an investment destination.
Both the Netherlands Foreign Investment Agency and the tax authority unit that concludes advance pricing agreements and advance tax rulings have reported growing insecurity among taxpayers and potential investors concerning the country's investment climate, Wiebes said.
“The future is already here,” he concluded, urging an offensive approach.
He admitted that the Netherlands, as an open trading economy, had become “maybe not a tax paradise, but a transition country” for taxpayers looking to exploit loopholes between countries' tax systems for aggressive tax planning. These multinationals typically rerouted their profits and operations through the Netherlands by opening a post office box there.
“We could, of course, always kneel down, grieving at the languishing empty letter boxes, but that won't necessarily help us,” he said.
The Netherlands instead has chosen to be a “loyal, proactive participant” in the OECD's effort to combat tax base erosion and profit shifting. Such a stance will allow the country to weigh the outcome of the BEPS action plan, Wiebes said, and simultaneously guarantee the appeal of the Netherlands' investment climate in “the post-BEPS world.”
The Organization for Economic Cooperation and Development issued most of the final recommendations under its sweeping, 15-item action plan to rewrite the global tax rules in October 2015. Among the recommendations were changes to the OECD transfer pricing guidelines that would ensure companies report profits where activities take place (197 ITM, 10/6/15).
Wiebes said a number of initiatives under the BEPS plan were non-negotiable, such as the principle of taxing profits where they are realized, some aspects of the changes to tax treaties and the Dutch participation exemption.
“We need to keep our hands off those, but, beyond that, let’s fight” to have a voice in the debate and be able to shape the Netherlands' appeal as a location for multinationals in the future, Wiebes said.
Multinational companies today account for 40 percent of the jobs in the Netherlands, Wiebes noted. As an open economy, the country competes with Ireland, the U.K. and other locations to attract multinationals and the jobs they bring. At 12.5 percent, Ireland's corporate tax rate is the lowest in Europe, while the U.K. plans to bring its rate down to 17 percent from 20 percent.
The state secretary predicted that competition on tax rates will increase as countries align their tax regimes with the OECD's recommendations for combating BEPS and the opportunities for tax base erosion decrease. With a nominal corporate tax rate of 25 percent, the Netherlands is ill-equipped to compete in this race, making a lower rate necessary.
Wiebes, seeking to reassure those worried that the pendulum might swing too far the other way, said, “I think we all know that we won't become the discount store of Europe—I don't think we will become an Ireland.”
Several practitioners at the conference said the OECD's action plan against tax avoidance raised concerns about legal protection.
Wilbert Kannekens, head of tax at KPMG in the Netherlands, said “the commotion and emotion” over tax avoidance by large companies and the BEPS “crackdown” threaten to compromise taxpayers’ legal certainty and protection.
“Especially in a situation in which we're dealing with multiple governments that are doing a lot of fair sharing,” he said.
Mark Hendriks, a partner at the Jaegers & Soons Advocaten law firm, said Action 12 of the BEPS plan, which provides for mandatory disclosure of aggressive tax planning structures, raises multiple questions about legal protection.
“What are the tax-minimizing structures? Who will have to report them? Say you indeed report them. What about the right against self-incrimination?” he asked.
Noting that a Dutch law would be needed to implement this recommendation, he said, “We're going to have a bitter pill in legal protection there.”
Also speaking at the Amsterdam conference, Frans-Jozef Haas, a justice with the Court of Amsterdam, said tax advisers needed to take more responsibility in light of the European Commission's multiple recent state aid rulings.
EU regulators recently qualified fiscal deals the Netherlands and Belgium struck with companies like Starbucks Corp. and Anheuser-Busch InBev NV as illegal state aid, and investigations into deals Ireland and Luxembourg concluded with Apple Inc. and Amazon.com Inc. are pending.
The European Commission's ruling that Luxembourg's deal with Fiat Chrysler Automobiles NV constituted state aid was made public June 9 (112 ITM, 6/10/16).
The burden is now on tax advisers to ask themselves whether what they are advising companies may later be qualified as unlawful state aid and potentially be recouped by an EU member country. “This is where the adviser enters the picture. He needs to tell his client: ‘Careful, you have this problem here.' ”
Practitioners, however, retorted that too many veils shroud the EU application of state aid rules.
“The process of state aid and how it is handled by the European Commission is incredibly foggy to me. Nobody is able to get a handle on this—not even the European Parliament,” Kannekens said.
Adding that the commission's directorate-general for competition is staffed by a dozen workers who are expected to comb through some 10,000 rulings, he said, “this cannot but lead to arbitrariness.”
Too many “political and emotional factors,” moreover, are muddying what should be a legal question, Kannekens said. He cited the uneasy relationship between the EU and the U.K. as a prime example, with the country preparing to vote on whether to remain in the EU in a June 23 referendum.
“Does the European Commission today have the audacity to accuse England of state aid when a Brexit is just around the corner?” he asked.
To contact the reporter responsible for this story: Linda A. Thompson in Brussels at email@example.com
To contact the editor on this story: Molly Moses at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)