November 10, 2017 / 4:13 PM / a year ago

UPDATE 1-Dutch government tightens rules for trust managers

(Adds finance minister quote, background)

AMSTERDAM, Nov 10 (Reuters) - The Dutch government said on Friday it would introduce stricter rules for managing trusts, in an effort to get a firmer grip on an industry coming under increasing scrutiny in the Netherlands.

The new rules stem from a Dutch parliamentary inquiry in June that found trust managers often ignore international rules and regulations, enabling tax-dodging and other suspect behaviour.

As such, they pre-date the revelations in the so-called Paradise Papers, a trove of financial documents leaked mostly from Appleby, an offshore law firm. Dutch tax deals with international companies have come under fire since the documents revealed the details of some of those deals.

The new rules will oblige those who oversee financial assets on behalf of their owners to properly investigate clients before doing business with them and to make that information available to the central bank. They will also make it easier to withdraw the licenses of those that break the rules. “Trust managers should act as gatekeepers of the financial system and prevent money laundering and tax evasion”, Dutch Finance Minister Wopke Hoekstra said. “They have not adequately defended our system in recent years, so we have to step in.”

The Netherlands is home to many trust managers because of its favourable treatment of dividends and royalties, wide network of tax treaties and long-standing practice of pre-negotiating corporate tax deals.

The largest trust manager, Intertrust, listed on the Amsterdam stock exchange in 2015. Its shares traded down 3.2 percent at 13.36 euro at 1600 GMT.

Intertrust had no immediate comment on the new rules. But in its submission to the June inquiry, the company said it adheres “not only to the letter, but also the spirit of laws and treaties, including those which govern our client’s dealings.”

The Dutch government, installed last month, has said it wants to limit the use of shell companies as a way to transfer money to tax havens. It plans to introduce a tax on royalties and wants to make sure that companies using the Dutch tax system have actual economic activities in the country.

Earlier this week, the Ministry of Finance said it would investigate 4,000 tax deals offered to foreign companies in recent years, after the Paradise Papers showed errors in how a previously undisclosed deal with U.S. consumer-goods giant Procter & Gamble was set up.

There are no allegations the arrangement was improper, but the Dutch deputy minister for finance acknowledged the deal, which was signed off on by a single inspector, should have been vetted by an entire team.

P&G, the maker of Pampers diapers, Gillette razors and Tide laundry detergent, issued a statement on Tuesday denying involvement in any form of tax avoidance. (Reporting by Bart Meijer; editing by Larry King)

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