Dutch Government Criticised Over Tax Cut Favoured by Large Businesses

On Thursday, the new government of Netherlands came under fire in parliament for scrapping a 15% dividend withholding tax, after NOS, a national broadcaster said that Unilever, Shell, Nobel, Akzo, and Philips had requested for the change.

Shell confirmed to Reuters it had asked for the change. However, Philips denied the claim. Akzo Nobel refused to comment. Unilever declined to say whether it asked for the change however it said that the company “welcomes measures that improve the business climate in countries where we operate.”

Mark Rutte, the Dutch Prime Minister, has said that the policy will help the country maintain its appeal to foreign investors as it slashes other tax perks as a response to fears that the tax policies of the Netherlands have helped multinationals dodge paying fair taxes.

It is also slashing its corporate tax rate from 25% to 21%.

The withholding tax involved the Dutch state-levied tax on dividends when they were paid. Dutch citizens were able to reclaim that amount in their annual tax returns, and many foreign investors could claim exemption from taxes that were levied by their own governments to avoid double taxation. However, those that are based in countries without dividend taxes (i.e., Britain) had no way to claw back the Dutch tax.

The idea of getting rid of dividend withholding tax experienced opposition from Dutch voters, as it would principally benefit foreign investors.

Clarity was demanded by opposition parties from Wopke Hoekstra, the Finance Minister, during his first appearance on the parliament floor.

“I had a lot of romantic and less romantic ideas of how my start here would go, but I’ll admit right away that I did not really expect this,” said Hoekstra, facing calls for an explanation, which he might submit to the house in a written statement.

Last week, Jessica Uhl, the CEO of Shell said that the company would consider simplifying its dual-class share structure that designed to shield non-Dutch investors from the tax if the plan continues.

Frank van Hoorn, the Shell spokesperson, said that there was nothing secret or treacherous about the lobbying of Shell for the change, as it was normal for interest groups to try to convince the government to adopt policies that are favourable to them.

In a company statement, Shell said that abolishing the dividend withholding tax “improves the competitiveness of the Dutch economy, attracts foreign investment, and reduces the administrative burden for companies.”

The debate on Thursday follows a discussion earlier in the week regarding “advance tax rulings” that are favourable to large business revealed in the so-called “Paradise Papers.” That led to a commitment by the Finance Ministry on Wednesday to evaluate whether 4,000 such rulings granted between 2012 and 2016 were properly vetted.