Finance ministry calls for further reform to Dutch tax system

20 Feb 18

The Dutch finance ministry has said the country’s tax policies should be further reformed after 72 errors were found in how the government processed tax deals with international companies.

The errors were revealed in a recent review of tax agreements with international companies and deputy finance minister Menno Snel said, in response, that such deals should only be made by a team of centralised, specialist tax experts.

The government is already carrying out modest reforms to its tax system, such as on so-called advance rulings whereby a tax authority approves in advance prices one branch of a company charges another when they do business.

The price is then valued by many multinationals. Although, critics have said the Dutch government’s rules around this are not strict enough and that they can be used to shift profits into zero tax jurisdictions.

Advocates of advance rulings say they are necessary to attract business.

Deputy finance minister Menno Snel said in a letter to Parliament that the review gave an opportunity for the government to revise these ‘advance’ rulings but they still needed to improve in “some ways”.

The government should not be giving certainty in advance to companies that only make a limited contribution to the actual economy, he said.

“However, the Cabinet remains a steadfast advocate for giving clarity to taxpayers at an early stage,” Snel added.

The ministry’s review looked at all deals offered to international companies in the 2012-2016 period and found that in six out of 3,101 cases, the countries specialised team for international tax rulings failed to have two agents sign off on a deal as required.

The review found a total of 78 faulty cases, according to Snel, out of which 72 were made by local inspectors.

After reviewing the 72 problematic agreements, the ministry concluded that in five, the “substance” of the ruling was wrong or probably wrong, Reuters reported.

In another 1,361 advance rulings that were made by regular agents, 63 should have been turned over to the specialised team, but were not.

The Dutch government said in December it would work with the European Commission to investigate IKEA’s tax arrangements in the country, as part of the EU crack-down on aggressive corporate tax avoidance.

The Netherlands has also been criticised for its tax deals with multinationals such as Starbucks, which the European Commission said had received an unreasonably generous advance ruling by the Dutch.

The European Council published a blacklist of 17 countries classified as tax havens, but the list did not include EU member states.

But NGOs warned that a number of member states would meet the criteria of tax havens, according to the bloc’s own rules. These countries include Ireland, Luxembourg, the Netherlands and Malta.

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