Shell, Unilever Say Dividend Tax a Big Burden on Dutch Corporations

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By Linda A. Thompson

The Netherlands’ dividend withholding tax is a millstone around the neck of the mostly foreign investors who prop up the country’s major corporations, chief executives from Shell and Unilever have told lawmakers.

Senior executives from two of the largest Dutch corporations—Shell Nederland B.V. and Unilever Nederland—have said there is insufficient homegrown capital to fuel large companies, making them dependent on foreign shareholders who can fund their growth and investments. The corporate executives pointed to the lack of domestic capital as a key reason why the country’s 15 percent tax on dividend distributions is a major burden on resident multinational corporations.

They spoke during a Dec. 14 parliamentary committee meeting, held in response to the incoming Dutch government’s surprise decision to scrap the tax beginning in 2020. The decision has stoked outrage from opposition parties on the left and right.

Prime Minister Mark Rutte and leaders of the four other ruling parties have struggled to make a convincing case for the abolition when pressed to do so during parliamentary meetings, pushing lawmakers from the Green Party, the Socialist Party and the Labor Party to convene the Dec. 14 “roundtable” to better understand their stance.

Opponents say the government is caving to pressure from corporations and the business lobby—an accusation company executives denied at the meeting.

‘Unnecessarily Difficult’

During the meeting, company executives impressed on the lawmakers present that the forthcoming abolition of the tax is critical to large Dutch corporations because of their dependence of shareholders who live outside the country’s borders.

Marjan van Loon, the chief executive of Shell, pointed out that fewer than 5 percent of the oil giant’s investors are Dutch residents, while more than 80 percent of the shareholders of its US competitors like Exxon Mobil Corporation and Chevron Corporation are domestic investors.

Shell has spent more than 10 years urging lawmakers to abolish the dividend withholding tax because of the “vital importance” of foreign investors to large Dutch corporations, van Loon said. “We believe that we have to make it easy for them to invest here, and the dividend withholding tax is making it unnecessarily difficult for foreigners to invest in Dutch companies,” van Loon said.

Shell merged its Dutch and British parent companies in a new head office in the Hague in 2005, and has pushed for the end of the tax since then, according to its position paper.

Threat from Unilever

Unilever, the Anglo-Dutch consumer goods giant, is similarly dependent on foreign investors, Kees van der Waaij, its chairman, said. He noted that half of the company’s shareholders can’t offset paid dividend tax against personal or corporate taxation—and those are the individuals currently deciding where to place the company’s sole headquarters.

“This is not specific to Unilever; this is applicable to any company that is faced with such a choice,” he said.

In April 2017, the Anglo-Dutch company announced it would review its dual legal structure—meaning its board is currently mulling whether to make its Dutch or U.K. unit its sole head office. Currently, several hundred jobs are centered in Rotterdam, according to the position paper it submitted to lawmakers in advance of the hearing.

Unilver realizes 90 percent of its profits outside the U.K. and the Netherlands, van der Waaij said. Thus, “an extra 15 percent tax” is levied on foreign profits when dividends are distributed to foreign shareholders in the Netherlands, though there isn’t an extra tax if the dividends are distributed in the U.K., he said.

This difference in the tax treatment of dividend distributions is “an important consideration for every board that is submitting the location of a corporate seat for approval to shareholders,” van der Waaij said.

’No Blackmailing’

The current Dutch ruling parties— the Christian Democratic Appeal, the prime minister’s pro-business VVD party, the liberal-democratic D66, and the Christian-Democratic ChristenUnie—announced their intention to do away with the dividend withholding tax in their Oct. 10 ruling agreement.

Ending the tax is expected to reward foreign investors with tax savings of 1.4 billion euros ($1.6 billion) according to a government analysis of the budgetary impact of the measures.

Because the four ruling parties have a majority—albeit of just one seat—in the House of Representatives, the plan to do away with the tax is as good as certain to become law, unless lawmakers from the ruling parties reconsider it.

Hans de Boer, chair of the Confederation of Netherlands Industry and Employers (VNO-NCW), said the group hadn’t inappropriately pressured lawmakers during the months-long process leading up to the formation of a new government.

“We always have conversations on the basis on substantive arguments. There is never any blackmailing,” he said.

To contact the reporter responsible for this story: Linda A. Thompson in Brussels at correspondents@bloomberglaw.com

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

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