Dutch government cracks down on international tax avoidance | News report

News | 30-08-2013 | 16:05

The Netherlands has tax treaties with more than 90 countries. Research shows that these international treaties of the Netherlands do not compare favourably with tax treaties of other countries. However, the tax treaty that the Netherlands has with Zambia (from 1977) is outdated and most of them do not have anti-abuse clauses. This means, among other things, that unintended use of these treaties in the Netherlands remains a risk.

“By exploiting loopholes in tax treaties and differences in tax rules between countries, multinationals can avoid paying taxes,” Ploumen said. “This means poor countries lose tax revenues, which are obviously money they should be spending on things like infrastructure and education.”

The Netherlands wants to help developing countries stem this loss, ideally through internationally binding measures.

Weekers: “The Dutch government is in favour of tightening rules and increasing transparency globally, in consultation with the OECD, the G20 and the EU. Measures taken by the Netherlands alone cannot prevent companies from taking other paths; they simply shift the problem. But we can do something. Therefore, we will focus on increasing transparency.”

The government is taking the following measures:

General measures

• The substantial activities requirement (the company must bear real risks in the Netherlands and the actual management of the company must be carried out in the Netherlands) will apply to more companies.
• The Netherlands will proactively inform its treaty partners if it is later found that a company does not meet the substantial activity requirements. Thanks to the improved exchange of information with source countries, the country will be able to deny treaty benefits to a company.
• The exchange of information will also apply to certain financing companies that have obtained pre-determination.
• The tax authorities will only process tax ruling requests from holding companies (which receive dividends from and pay dividends to non-residents) if the group of holding companies has sufficient connections with the Netherlands.

Specific measures for low-income and lower-middle-income countries

• The Netherlands will advise Zambia to renegotiate the 1977 treaty and include anti-abuse clauses in the new treaty. The Netherlands will also approach other low-income and lower-middle-income countries to see if they are willing to add anti-abuse clauses to existing treaties. When new treaties are signed, careful consideration will be given to what anti-abuse clauses could be included, in close consultation with partner countries. As a follow-up to the above-mentioned IBFD study, tax treaties with other developing countries will be reviewed to see if they could facilitate the risk of unintentional tax evasion.
• The Netherlands provides technical assistance to low-income and lower-middle-income countries to strengthen tax administration and thereby increase tax revenues, reduce unnecessary tax exemptions and combat tax evasion and avoidance. This support will be expanded as much as possible. If necessary, the government will provide additional funding for this purpose.