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Dutch, under pressure on tax, offer talks with emerging economies
August 30, 2013 / 3:55 PM / in 4 years

Dutch, under pressure on tax, offer talks with emerging economies

AMSTERDAM (Reuters) - The Dutch government will offer nearly two dozen developing countries the chance to renegotiate tax treaties to close loopholes that allow multinationals to avoid taxation, it said Friday.

Dutch national flags hang from windows overlooking Central Station in Amsterdam April 28, 2013. REUTERS/Cris Toala Olivares

The Dutch have come under increasing international pressure to take steps to crack down on their tax system, which enables multinationals to avoid higher taxes in some other countries by setting up a base in the Netherlands.

“By making use of loopholes in tax treaties in combination with differences between national tax rules, internationally operating companies can avoid paying tax,” Development Cooperation Minister Lilianna Ploemen said in a statement.

“It means that poor countries miss out on tax revenues, funds they clearly need for matters such as infrastructure and education.”

The Netherlands has more than 90 double taxation agreements. Several thousand international corporations, including 80 of the world’s largest, use so-called letter-box companies with no employees to re-route profits to tax havens, often paying no withholding tax in the country of origin.

Recent studies estimate losses to developing countries are at least $1 billion (646 million pounds) per year.

State Secretary for Finance Frans Weekers said the Netherlands “wants to help developing countries put a stop to this loss, preferably by means of internationally binding measures.”

Friday’s announcement comes just days before international tax avoidance is discussed during meetings at the G20 in Moscow.

The Dutch will seek “a worldwide tightening of the rules and greater transparency through consultations in the OECD, G20 and the EU,” Weekers said.

The review of tax treaties with developing countries was launched after Mongolia cancelled its tax treaty with the Dutch, accusing the Netherlands of enabling “fiscal avoidance.”

The Netherlands will in future inform treaty partners when a company does not meet so-called substance requirements and is merely using a Dutch shell company to avoid taxes.

“The Netherlands will also approach the other low-income countries and low middle-income countries to see if they wish to add anti-abuse clauses to the existing treaties,” a statement said.

The Dutch advised Zambia to renegotiate their treaty, dating back to 1977, to introduce anti-abuse provisions.

Reporting by Anthony Deutsch; Editing by Ruth Pitchford

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