‘Tax haven’ now not? Rutte begins to lean to the left within the Dutch elections

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  'Tax haven' no longer?  Rutte begins to lean to the left in the Dutch elections

Mark Rutte

Photographer: Sem van der Wal / ANP / AFP / Getty Images

Photographer: Sem van der Wal / ANP / AFP / Getty Images

In the early hours of October 5, 2018, Dutch Prime Minister Mark Rutte’s phone lit up with a text message: “Mark, are you awake? I need to talk to you. “It was Paul Polman, then Chief Executive Officer of Unilever Plc.

Polman informed the Dutch newspaper Algemeen Dagblad some time later that he had sent this text because he wanted to inform Rutte of a decision by the Anglo-Dutch personal care products company before it was published. Unilever announced that day that it was abandoning plans to consolidate its headquarters in the Netherlands and opting for London instead.

For Rutte, who had devoted significant political capital to luring the company – including a hugely unpopular plan to abolish the country’s dividend tax – Unilever’s decision was a slap in the face. It paved the way for his business relationship to be postponed – one that made itself felt in his re-election campaign on March 17th.

Within weeks of Unilever’s announcement, Rutte decided to leave the dividend tax intact, marking the start of a slight tilt to the left for his VVD party to the right of center. His re-election platform now wants to “prevent tax evasion and undesirable tax regulations with which companies avoid taxes” and proposes a higher corporate tax. Some see the left turn as a politically smart move by the 54-year-old leader who will almost certainly win a fourth term that will make him the longest-serving Prime Minister in Dutch history.

“Rutte has a sixth sense of how to behave at crucial moments and when to change course,” said Peter Kanne, senior advisor at I & O Research. Pollster’s research shows that the Dutch have been going left on socio-economic issues for a number of years.

Business friendly

Although the Netherlands is known to be business-friendly and thus one of the winners of the Brexit exodus from Britain, Rutte has picked up on a growing sentiment in the country that companies are not giving back enough. Following the Unilever saga, oil giant Royal Dutch Shell Plc confirmed in 2019 Media reports that it has not paid any income tax in the Netherlands and that it became known last year that the travel e-commerce company Booking.com BV, which pays almost no Dutch tax, received millions in government support during the pandemic.

While the pandemic – with nightly curfews causing unrest in the country – has been the biggest problem for voters and has got them to rally “around the flag”, corporate matters are increasingly part of the political conversation.

Margarine production in a Unilever NV factory

Photographer: Jasper Juinen / Bloomberg

“People no longer accept that companies only live for their shareholders,” said Hans Vijlbrief, a member of the social-liberal D66 party and deputy finance minister responsible for tax issues, in an interview. “If they have to pay their taxes, so do companies. People see that a company or a rock band is using the Netherlands to avoid taxes. People no longer want to live in such a country. “

All Dutch parties want higher corporate taxes, as their platforms show. Rutte’s VVD party wants to collect 3.5 billion euros more from companies, while the Labor party is considering up to 40 billion euros.

‘Tax haven’

The Dutch have one of the lowest corporate taxes in the European Union and are scrutinized by the bloc as a conduit country – or even a tax haven. The state’s corporate tax rate is 25% for profits over 200,000 euros.

According to the Tax Justice Network, the Netherlands ranks fourth in locations that facilitate tax evasion by multinational corporations, behind the British Virgin Islands, Cayman Islands and Bermuda. Companies from Google, from Alphabet Inc. to Uber Technologies Inc., have conducted transactions in the Netherlands because of their favorable tax system.

“Since the financial crisis, companies have been paying less taxes while public services have been marginalized,” said Bart Snels, a Green MP, in an interview. “The Netherlands will remain a tax haven.”

Political campaign posters ahead of the Dutch parliamentary elections

An election campaign poster featuring Mark Rutte on March 9th in Amsterdam.

Photographer: Peter Boer / Bloomberg

According to Arjan Lejour, Professor of Taxes and Public Finance, things have changed, particularly with a withholding tax on license fees that came into effect in January and in the country’s stance on tax issues at the OECD and the EU: from obstructive to cooperative at Tilburg University and Jan van de Streek, Professor of Tax Law at Leiden University.

Opposition politicians, however, wonder how far Rutte will go to rid the Netherlands of its reputation as a tax haven.

Parties like VVD “will do their best to give the impression that they want to make big changes, but in fact they are not doing much,” said Henk Nijboer, MP and finance specialist for the Labor Party, in an interview. Mahir Alkaya of the Socialist Party added that “they acted in words but took very small steps”.

“Twilight Zone”

Rutte’s party says they have always tried to fight tax evaders and denied that their stance has changed much.

“I’ve been with us for 10 years and we have continuously talked about fair taxes,” said Helma Lodders, Member of Parliament and finance specialist at VVD. The challenge is to counteract tax avoidance while maintaining a good business climate.

If the Netherlands are serious about repairing their tax system, they need to do more, say Van der Streek and Lejour. It needs a withholding tax on dividends, one of the largest flows of money out of the country; should curtail corporate deduction options; push for more transparency and renegotiate some bilateral tax treaties, they said.

NETHERLANDS POLITICS GOVERNMENT BUDGET

Hans Vijlbrief said: “We are now in a twilight zone.”

Photographer: Bart Maat / ANP / AFP / Getty Images

This could be one of the measures Rutte’s coalition partners will bring to the negotiating table if he is to form a new government. Because while Rutte’s tax plans remain vague, it is a Dutch certainty that he will rule in a coalition – maybe with four or five parties. He has ruled out joining Geert Wilders’ right-wing PVV and Thierry Baudet’s Forum for Democracy.

That leaves him with parties on the left, suggesting that profound changes in the Dutch financial landscape may be inevitable for a new Rutte government.

“We are now in a twilight zone,” said Vijlbrief from D66, who could be part of the ruling coalition. “We have to get out of the dark side and onto the light side of the force.”

– With the support of Joost Akkermans, Isabel Gottlieb and Hamza Ali

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